Does diversity affect economic growth?
By Whitney Belin
web posted October 27, 2025
Does diversity affect an economy's growth positively or negatively? Most argue that diversity improves economic growth and encourages creativity with innovation. A 2025 Nobel Prize winner, Joel Mokyr, discusses this argument in a lecture. Diversity, defined by Oxford Dictionary, is "the practice or quality of including or involving people from a range of different social and ethnic backgrounds." According to the definition, diversity is a group of people that have differences in race, religion, and language, all interacting in a society. But does a diverse society - defined in this manner - actually contribute to economic growth? To answer this question one must look at the problem both in a macroeconomic view and a microeconomic view.
From a macroeconomic perspective, diversity lowers economic growth. Mokyr splits the term diversity into three groups: religious, linguistic and ethnic fractionalization. Mokyr uses three graphs each displaying one of the categories to illustrate his argument. Each of the slopes are negative, meaning the higher diversity / fractionalization, the lower the economic growth. Thus, according to the charts, diverse societies on a macroeconomic level lower economic growth.
From a microeconomic level, extensive research has been done and has mixed results. Studies were performed by analyzing different companies that would be considered diverse. According to Mokyr, working in an environment that differs in culture and knowledge spurs creativity, benefiting a business. However, surface level diversity, such as race, can have negative effects on a microeconomic level.
Diversity positively affecting firms in the branch of microeconomics makes sense for most people, but negatively affecting the economy as a whole may be harder to understand. Some contributions to economic growth declining in diverse societies can be differences in culture. Differences in culture can often lead people to be ignorant and not understanding of others that differ in background. This can lead to segregation, not in the severity of Jim Crow laws, but in a less noticeable way. People with different races or ethnicities might only want to be around people like them. This can lead to neighborhoods becoming segregated as a result of those with different cultures forming their own communities. Societies becoming divided and misunderstanding each other will contribute to economic growth decreasing over time.
In summary, diversity can positively affect the economy on a microeconomic level by cultivating creativity. However, on a macroeconomic level, diversity can harm the economy, decreasing its growth. This is due to many reasons, a few of which are societies not being united. Does this mean that diversity is wrong or bad? It simply means people must learn to understand and harmonize with people of different cultures and ethnicities. 
Whitney Belin is an economics student and this is her first contribution to Enter Stage Right. (C) 2025 Whitney Belin
