Abstract: Relatively little is known about what determines whether a heterogenous population ends up in a cooperative or divisive situation. This paper proposes a theoretical model to understand what social structures arise in heterogeneous populations. Individuals face a trade-off between cultural and economic incentives: an individual prefers to maintain his cultural practices, but doing so can inhibit interaction and economic
exchange with those who adopt different practices. We find that a small minority group will adopt majority cultural practices and integrate. In contrast, minority groups above a certain critical mass, may retain diverse practices and may also segregate from the majority. The size of this critical mass depends on the cultural
distance between groups, the importance of culture in day to day life, and the costs of forming a social tie. We test these predictions using data on migrants to the United States in the era of mass migration, and find support for the existence of a critical mass of migrants above which social structure in heterogeneous
populations changes discretely towards cultural distinction and segregation.
INTRODUCTION:
Ethnic, linguistic, and religious heterogeneity are associated with a variety of politico-economic problems, including low growth, low provision of public goods, and conflict. Yet the effects of diversity are not uniform: some heterogenous populations manage to avoid societal conflict and are economically successful. In some cases, diversity can even have positive effects on growth, productivity, and innovation.1 Seeking to explain this puzzle, recent work finds that social cohesion plays an important role in how well a population ‘deals’ with its heterogeneity. For example, more segregated populations are found to have lower quality of governance, lower trust between citizens, and worse education and employment outcomes, compared to similarly heterogenous populations that are better integrated.2
Despite its clear importance, relatively little is known about what determines whether a heterogenous population ends up in a cooperative or divisive situation. In this paper we propose
a model that allows us to study this question. We ask, first, what social structures can arise when society is composed of heterogeneous groups, and second, what features influence which
social structure arises in a particular environment. Understanding this is crucial in an increasingly mobile world in which immigration and social cohesion are frequently at the forefront of
political agendas.3
In our model, individuals from two distinct groups – natives and immigrants – living sideby-side, make choices over activities to engage in, and who in the community to interact with. Some activities, such as language choice, are ‘cultural actions’, in the sense that each group will start with an ex ante preferred language, and there is a cost to switching to any other choice.
Other activities are ‘non-cultural’: there is no group-specific reason why one activity is more costly to engage in than another.4 For example, there may be no group-specific reason why one
sport should be more costly to engage in than another.5
Interaction provides opportunities for economic exchange, and so individuals can benefit from forming social ties with others in the
population. Since interaction requires some degree of commonality of actions, we assume that the benefit of a link is increasing in the number of shared activities, with a fixed (per-link) cost
of formation. The fundamental trade-off is that an individual prefers to maintain his cultural practices but doing so can hinder opportunities for interaction and exchange with those who
adopt different practices.6
