Understanding cultural diversity and economic prosperity in Europe: a literature review and proposal of a culture–economy framework

Abstract

Increasingly, cultural diversity is being paid attention to by economists, signifying the importance of international allocation of human capital to world economic wellbeing. This paper attempts to understand how Europe can optimally benefit from cultural diversity while facing a spectrum of obstacles. Hypotheses tested by past studies are important but are generally limited by the multidimensional dynamics of the causality mechanism. This paper synthesizes the social, economic, and institutional element spiral within cultural diversity by proposing a culture–economy framework to understand economic prosperity. This paper is developed by three syntheses of the substantive literature: 1) identifying the research agenda of cultural diversity and economic prosperity, 2) conceptualizing the multidimensional dynamics from cultural diversity to economic prosperity, namely the culture–economy framework, and 3) understanding Asia–Europe relations with respect to cultural diversity and creative destruction. Intercultural learning amid complex interactions of identified elements between factor productivity and barriers was found to be the micro-foundation that links cultural diversity to economic prosperity in Europe. Cultural diversity was found to be the cause of richer ideas, heuristics, perspectives, and skills, suggesting the potential sustainability of economic prosperity with creativity-oriented policies in the region.