Moderation Effects of Institutional Quality, Diversity, Income inequality and Globalization on Social Cohesion: An Empirical evidence

Abstract

Social cohesion is both an end, as well as a mean, to achieve other economic and
developmental goals. As an end, a more cohesive society can be thought of as a peaceful
place to live in. As a mean, social cohesion has various economic and developmental
implications. Therefore, nurturing social cohesion can be a desirable objective and knowing
about different determinants of social cohesion can be helpful in this regard. Ethno-linguistic
diversity and socioeconomic deprivations have been identified as such determinants in the
existing literature. Well-functioning institutions can also be good predictors of social
cohesion in a society. They can help to mitigate the negative effects of diversity on social
cohesion. However, hardly any study has empirically investigated the moderating effects of
institutions on social cohesion. The current study has tried to fill this gap. For this purpose, a
cross country analysis has been done by employing the Least Squares Dummy Variables
(LSDV) technique for empirical estimations. Institutional quality has been measured with the
help of an index that has been constructed by taking into account the political, legal, and
economic dimensions of institutional quality. The results suggest that diversity, income
inequality, and globalization have negative whereas institutional quality has positive effects
on social cohesion. The use of the interactive term of institutional quality with diversity,
income inequality, and globalization reveals that institutional quality works to nullify the
negative effects of diversity, income inequality, and globalization on social cohesion.