Does diversity matter for development? New evidence of ethnic diversity's mediation between internal migration and economic growth across Indonesia's regions.

Abstract

Migration can contribute to economic growth. Its impact on ethnic diversity may also generate socio-cultural tensions and political instability. Having said that, ethnic diversity can play a role in both promoting and hindering economic growth depending on its form and extent. This role often rests on the levels of either ethnic fractionalization (usually related to higher economic growth) or ethnic polarization (more commonly associated with lower economic growth). Such considerations raise a question about the ways ethnic diversity mediates the relationship between internal migration and economic growth. The following paper responds to that question by focusing on different regions of Indonesia. Drawing on comprehensive statistics and updated classification of Indonesia's ethnic groups, it presents new evidence on the archipelago's ethnic diversity which is cross-referenced with recent fractionalization and polarization indexes. This methodological enhancement allows the study to translate with a greater degree of accuracy the mediation of ethnic diversity on the relationship between internal migration and economic growth across Indonesia's regions than previously carried out. What emerges is a rather mixed picture of the intermediating role of ethnic diversity. There is a significant influence in various regions, but different sets of variables also modulate the relationship in others. We can also discern an identifiable link between the economic region in question, the indicators of ethnic diversity referenced, and the given rate of migration. Placed in composite relief, the findings draw attention to the uneven and complex character of Indonesia's regional development.