Chinese dialects, culture & economic performance

In this paper, we explore the relationship between dialectal and cultural diversity and the effects of dialectal diversity on economic performance by drawing evidence from the Chinese Family Panel Study (CFPS) and Chinese prefecture-level cities. We find that dialectal diversity is a proxy for cultural diversity in China. We compute five indices of Chinese dialectal diversity: 1. Dialectal fractionalization; 2. Adjusted dialectal fractionalization; 3. Dialectal polarization; 4. Adjusted dialectal polarization and 5. Periphery heterogeneity. Dialectal fractionalization and dialectal polarization have a positive effect on both income per capita and economic growth. Adjusted dialectal fractionalization and periphery heterogeneity exhibit a positive effect on economic growth. The effect if robust when considering the influence of Putonghua proficiency and external migration. Our analysis also shows that dialectal diversity promotes economic performance through increasing public expenditure.