Introduction: It’s often said that “variety is the spice of life.” When it comes to kinds of people, variety can be a spice; but it can also be poison. On the one hand, the gains from specialization and exchange under the division of labor are potentially larger when individuals are diverse. On the other hand, the differences between individuals can be a divisive force that catalyzes destructive conflict. This chapter considers social differences, how institutions affect them and their relationship to economic outcomes. Broadly speaking, consideration of such questions falls under the rubric of studies examining what the social science literature calls “fractionalization.”
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