Linguistic distance and economic development: A cross‐country analysis

• Published date: 01 May 2022
• Author: Mariko Nakagawa,Shonosuke Sugasawa
• Date: 01 May 2022
• DOI: http://doi.org/10.1111/rode.12850

Rev Dev Econ. 2022;26:793–834. wileyonlinelibrary.com/journal/rode

|

793

Received: 21 October 2020

|

Revised: 26 October 2021

|

Accepted: 26 November 2021

DOI: 10.1111/rode.12850

REGULAR ARTICLE

Linguistic distance and economic development:

A cross- country analysis

MarikoNakagawa1,2

|

ShonosukeSugasawa3

1Institute of Economic Research,

Hitotsubashi University, Kunitachi,

Japan

2Graduate School of Information

Sciences, Tohoku University, Sendai,

Japan

3Center for Spatial Information Science,

University of Tokyo, Kashiwa- shi, Japan

Correspondence

Mariko Nakagawa, Institute of Economic

Research, Hitotsubashi University,

Kunitachi, Japan.

Email: nakagawam@ier.hit-u.ac.jp

Funding information

Japan Society for the Promotion of

Science; Scientific Research, Grant/

Award Number: 13J10130; Research

Activity Start- up, Grant/Award Number:

16H06703; Grant- in- Aid for Young

Scientists, Grant/Award Number:

18K12764

Abstract

This study investigates the relationship between access

to domestic and international communication and eco-

nomic development. It does so by constructing two in-

dices of linguistic distance, domestic and international,

capturing language acquisition costs, which are higher

when acquiring linguistically more distant languages.

The domestic linguistic distance index captures the con-

straints of communication among speakers of different

mother tongues within a country, while the interna-

tional linguistic distance index captures the constraints

of global communication via English. This study’s results

reveal a negative association between domestic linguistic

distance and GDP per capita, whereas international lin-

guistic distance has no significant association. Moreover,

by investigating the mechanisms of the negative associa-

tion of the domestic linguistic distance, we find that com-

munication difficulty among different language groups

hinders economic development through a channel of less

employment requiring communication- based operations.

Furthermore, we determine that the negative association

of the domestic linguistic distance may be mainly driven

by relatively poor countries such as many in Africa.

KEYWORDS

domestic linguistic distance, economic development,

international linguistic distance, mismatch in language use

This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits

use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or

adaptations are made.

© 2021 The Authors. Review of Development Economics published by John Wiley & Sons Ltd.

794

|

NAKAGAWA et al.

1

|

INTRODUCTION

In recent years, the impacts of ethno- linguistic heterogeneity on economic and political activities

have attracted increased research interest. Realizing that ethno- linguistic heterogeneity is an im-

portant factor within considerations of various social phenomena, researchers have produced a

vast body of empirical and theoretical literature on ethno- linguistic diversity. Easterly and Levine

(1997), Alesina et al. (2003), and Alesina and La Ferrara (2005) all investigate the impacts of ethno-

linguistic diversity on economic development. Easterly and Levine (1997) show that ethnic diver-

sity negatively affects a country’s income level and explain the low incomes in African nations in

particular. According to Alesina et al.’s (2003) cross- country analysis, ethnically and linguistically

diverse structures decrease growth levels, implying a negative effect of heterogeneous composition

of ethno- linguistic characteristics on economic development. Moreover, Alesina and La Ferrara

(2005) argue that heterogeneity costs come from difficulty in reaching agreement on productive

public goods and policies common to all ethno- linguistic groups. Economically underdeveloped

countries, such as some in Africa, could be negatively affected by disharmony between different

groups, preventing them from catching up with more developed countries.

Despite those negative effects, ethno- linguistic heterogeneity also plays a positive role in eco-

nomic activities. Alesina et al. (2016) find that diversity in the country of birth increases gross do-

mestic product (GDP) per capita, as a result of skill complementarity present within an ethnically

diverse workforce.1 Similarly, Docquier et al. (2020) show that birthplace diversity positively af-

fects GDP per capita in US states. The authors argue that this is because the benefit of skill comple-

mentarity outweighs the cost of communication between workers with different birth countries.

These impacts of ethnic diversity on economic outcomes, both positive and negative, are also

seen at more micro levels. For example, Trax et al. (2015) investigate the impact of national di-

versity on plant- level productivity. Their results show that fractionalization in terms of nation-

ality positively affects a plant’s productivity. By contrast, a field experiment conducted by Lyons

(2017) reveals teamwork between individuals with different national backgrounds to be worse

than that between those with the same background. That disparity is due to greater communi-

cation difficulties experienced in teams whose members are more heterogeneous in terms of

national background.

The existing literature thus shows that both costs and benefits stemming from heterogeneity

in ethnic backgrounds exist at various levels of economic activity. In this paper we focus on the

negative association between ethno- linguistic heterogeneity and economic outcomes at the na-

tional level and the mechanisms of this negative association. We consider which factors hinder

harmonious conformity and communication between different ethno- linguistic groups, noting

that a lack of trust toward other groups, as well as cultural differences, makes it difficult for them

to reach agreements. In addition, one of the fundamental barriers to adequate harmony existing

between various ethno- linguistic groups, especially those that have different languages, is seen

to be grounded in the lack of effective common languages, or of common languages that can be

shared with little acquisition effort. Typically, post- colonial countries adopt the colonizer’s lan-

guage(s) as the official language(s) while, by contrast, the mother tongues of native residents are

likely to be local and linguistically distant from those of the colonizers.

JEL CLASSIFICATION

O1; O5; F5

|

795

NAKAGAWA et al.

To identify the cost required to attain the ability to use domestic official languages differ-

ent from one’s native language when a society consists of different linguistic groups, we use a

measure of within- country linguistic distance. That measure indicates how distant residents’

mother tongues are from the official language in terms of linguistic characteristics. This linguis-

tic distance in the domain of domestic communication is reflective of language acquisition costs

(i.e., effort made) when acquiring domestic central languages. As Chiswick and Miller (2005)

and Isphording and Otten (2011, 2013) state, acquiring a language is more difficult if the na-

tive language is linguistically distant from the language to be learned (in this case, the official

language(s) of a country). Hence, the measure of domestic linguistic distance to the official lan-

guage(s) expresses the language acquisition costs incurred by individuals whose mother tongues

are different from the official language(s). We analyze the impact of domestic linguistic distance

on cross- country differences in economic development.

Similar costs for the acquisition of languages necessary for effective communication might

also be found in the international context. Recent empirical studies highlight the great impor-

tance of internationally spoken languages, such as English, for economic success in the mod-

ern era, when things and individuals are densely connected globally. In terms of international

migration, for example, Adsera and Pytlikova (2015) investigate whether potential immigrants

prefer destinations where English is the local language, arguing that English’s status as a global

language makes it a crucial determining factor in the configuration of migration decisions.

Additionally, Ku and Zussman (2010) report that trade partners sharing no common native lan-

guages communicate using English as a means to mitigate the language barriers. They show that

acquiring proficiency in English can overcome difficulties in communication and help to pro-

mote international trade. Similarly, Hutchinson (2005) argues that trade between the USA and

another country will be less intense if languages used in that country are different from English.

Moreover, as is discussed in existing literature, for example Jones (2001,Chapter 6) and Ku and

Zussman (2010), which focus on the communicative benefits of English as a lingua franca, ac-

quired proficiency in the language can promote economic development by providing access to

the world’s stock of technological knowledge that has recently been accumulated in English.

Given the substantive importance of English, its acquisition costs, which can be determined by

the linguistic distance between it and a country’s mother tongues, may also impact economic

outcomes of that country.

The impacts on economic development that a language’s distance from English has are con-

sidered with a slightly different concept from language acquisition in Spolaore and Wacziarg

(2009), who provide an alternative explanation for why distance to the USA might matter. They

employ the concept of genetic, rather than linguistic, difference: a measure of the time elapsed

since two populations shared common ancestors. The authors show the explanatory power of

the variation in the genetic distance to the USA, the most developed country, on the dispersion

in economic development, based on an idea that individuals genetically close to US residents

are more likely to follow or to catch up with the latest technology more easily due to the cultural

similarity or problem- solving methods.

In this paper we first construct linguistic indices. To consider how difficult it is to access ef-

fective domestic communication (i.e., the cost of acquiring the official language(s) necessary to

communicate with residents across an entire country) we determine each country’s domestic lin-

guistic distance (DLD). DLD is calculated as a population- weighted average of linguistic distance

between the official language(s) and residents’ mother tongues. Similarly, we determine the in-

ternational linguistic distance (ILD) to incorporate the cost accessing global communication in

English. We construct two different ILD indices,

ILDPC

and

ILDCC

: the former is calculated as the