Cultural diversity and economic performance: Evidence from European regions

Abstract

We investigate the relationship between diversity and productivity in Europe using an original dataset that covers the NUTS three regions of 12 European countries. In so doing, we follow the empirical methodology developed by Ottaviano and Peri (J Econ Geogr 6:9–44, 2006). The main idea is that, as cultural diversity may affect both production and consumption through positive or negative externalities, the estimation of both price and income equations is needed to identify the dominant effect. Based on this methodology, we find that diversity is positively correlated with productivity. IV estimates confirm the results, suggesting that causation runs from the former to the latter.