The economic consequences of cultural diversity in political organizations

Abstract I study the economic consequences of cultural diversity within political organizations. Using manually collected data on 25,568 members of county-level standing committees of the Chinese Communist Party and the Chinese Industrial Enterprise Database from 1998 to 2013, I find that cultural diversity in county standing committees significantly reduces industrial output. I further identify potential mechanisms: greater committee diversity is associated with lower government and capital construction spending, slower and weaker responses to public appeals, and lower labor and capital inputs as well as enterprise investment. Moreover, counties with more culturally diverse standing committees exhibit lower nighttime light intensity and reduced per capita GDP. Overall, these results highlight a potential limitation of China’s current political organizational structure and institutional arrangements.