Modernisation - A Saviour Running Late: Assessing the Validity of Modernisation Theory by Investigating the Effects of Diversity on Growth
Abstract: Modernisation theory is based on the idea that socioeconomic development leads to significant societal changes in culture and behaviour, changing the focus from group identity to individual ability. This paper seeks to investigate the validity of modernisation theory by examining the effects of ethnic, linguistic, and religious diversity on economic growth. This is done at the state level in the United States and India, using these as examples of countries that have reached different levels of development. Using OLS on a dataset constructed with official economic and census population data, we investigate the relationship between diversity and growth in the two countries separately. We find statistically significant and negative effects of diversity on economic growth in both countries, thus refuting the modernisation theory's claim that socioeconomic progress will diminish the importance of group categorisation along ethnic, linguistic and religious lines. The main contributions of this paper are therefore to demonstrate the shortcomings of modernisation theory in its classical form as well as to indicate a direction for future research in the study of economic effects of diversity at a subnational level.
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