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HUM
27,3 Caste and religious diversity
on human capital outcome:
evidence from India
166
Jhumur Sengupta
Jaypee Business School, Constituent of JIIT University, Noida, India, and
Debnarayan Sarker
Centre for Economic Studies, Presidency University, Kolkata, India

Abstract
Purpose – This paper aims to examine the impact of caste and religious diversity on human capital
outcome and external effect of ethnic capital on human capital accumulation process based on social
fragmentation of West Bengal state which is mainly shaped under caste and religious lines.
Design/methodology/approach – A field survey was undertaken in which 440 respondents
belonging to 440 households were interviewed in four municipalities of West Bengal – one each for
most homogeneous and most heterogeneous along caste dimension and the equal number along
religious line. For a cross sectional study during a one-year period between January-December 2006,
this study considers stratified random sampling method (a mixture of both purposive and random
sampling). In addition to construction of caste and a religion based fractionalization indexes, this study
considers regression analyses of ordinary least square method in order to explore the stated objectives.
Findings – It suggests that more heterogeneous localities have lower outcome of per capita education
after controlling the effect of per capita income. Moreover, the external effect of ethnic capital in
heterogeneous localities has also lower outcome of human capital accumulation process.
Originality/value – The lower human capital accumulation in the heterogeneous localities along
caste and religious dimensions might play an adverse effect on economic growth, crime, markets,
technological breakthroughs and the arts and science. So, institutional measures by government and
non-government sources are needed to improve the stock of human capital, particularly in the
heterogeneous localities influencing the positive impact on higher socio-economic outcome in those
localities.
Keywords Social fragmentation, External effect of ethnic capital, Socio-economic characteristics,
Human capital accumulation process, Ethnography, India, Human capital
Paper type Research paper

Introduction
Economic development scholars have recognized the important role of non-economic
variables like ethnicity in influencing the economic development viability of developing
countries[1]. Ethnicity is defined as social fragmentation in the form of religion, cultural,
racial and linguistic distinctions (Okediji, 2005). The implication of both theoretical and
empirical discussions suggests that ethnically diverse societies have a higher probability
of ethnic conflicts, which may lead to negative impact on all socio-economic outcomes
including human capital, perpetuating a vicious cycle of poverty, unemployment,
Humanomics economic growth and political instability. As regards human capital outcome is
Vol. 27 No. 3, 2011
pp. 166-183 concerned, ethnicity acts as important determinant of human capital outcome.
q Emerald Group Publishing Limited
0828-8666
DOI 10.1108/08288661111165213 JEL classification – J24, J18, J78, H42
It does not only affect productive endowment of current generation of a child but also has Caste and
an external impact on human capital accumulation (Conlisk, 1977; Loury, 1977; Borjas, religious
1992, 1994, 1995; Lundenberg and Startz, 1998; Chiswick, 1988; Altonji and Dunn, 1996).
It is observed that some minority ethnic groups have both low rates of returns and diversity
low levels of schooling, where as it is high for majority ethnic groups (Chiswick, 1988).
The discrimination among ethnic groups may result in lower access to schooling and
affect quality of schooling for some groups (Chiswick, 1988). Tomes (1983) argues that 167
religion is one of the determinants of family culture that in turn influences return on
human capital. Religious affiliations result in substantial differences in abilities,
opportunities, values and family culture which in turn influences rate of return to
human capital and earnings. It is also argued that ethnicity has an external effect on
the human capital accumulation process. Utility maximizing parents invest in their
children and ethnicity has an external effect on the production of children’s skills. The
human capital of children depends not only on the exogenous human capital of
the parents, but also on the external average skill of the ethnic group (Borjas, 1995).
More over, persons who are raised in advantageous ethnic environments will be
exposed to social and economic factors which increase their productivity, and the
larger or more frequent the amount of their exposure, the higher the resulting “quality”
of the worker (Borjas, 1992, 1994, 1995, p. 365). It is said that if ethnic externality is
sufficiently strong, skill differentiation observed among ethnic group can persist for
many generations and never disappears (Borjas, 1995). This study tries to examine the
impact of caste and religious diversity in Indian context[2], on human capital outcome
and explores external effect of ethnic capital on human capital accumulation based on
a field survey in the state of West Bengal in India.
This paper is organized as follows. Next section presents the review of the study.
The data set and survey design appear in the section next to review of study. The next
two sections present the methodology and the key results of the study. Conclusions are
contained in the last section.

Review of study
Ethnicity acts as an important determinant of human capital outcome. As regards its
impact on current generation is concerned, among other factors, both income and
ethnicity influence human capital outcome. Differences in productivity in schooling
among ethnic groups may be a plausible explanation for differences in levels of
schooling. It is observed that some minority ethnic groups have both low rates of returns
and low levels of schooling. On the other hand, high rates of returns and high levels of
schooling are observed among majority ethnic groups (Chiswick, 1988, p. 579). The
discrimination among ethnic groups in the access to schooling and in the quality of
schooling may also result in lower level of schooling and lower rates of returns from
schooling for minority ethnic groups (Chiswick, 1988, pp. 577-9). Tomes (1983) argues
that individuals of same religion possess similar endowments that are different from
endowments of individuals belonging to different religion. The paper considers religion
as one of the determinants of family culture that in turn influences return to human
capital. Using 1/100 sample of 1971 Census of Canada and restricting the analysis to
native-born white males between ages 25 and 64, who have positive earnings, the paper
shows that human capital variables like school experience are important factors for
determination of earnings. It is observed from the paper that variations in returns
HUM to schooling across various religious groups are substantial and the variations are
27,3 statistically significant. It is also found that Jews not only make greater investment in
schooling, but also receive higher rate of return on schooling as compared to other
religious groups. The paper suggests that religious affiliations result in substantial
differences in abilities, opportunities, values and family culture which in turn influences
rate of return to human capital and earnings. Durlauf (1996) and Benabou (1996a, b)
168 show that polarization in city suburbs in the USA has an adverse effect on human capital
accumulation process.
Cameron and Heckman (2001) examine the source of disparity between majority
(the whites) and minorities (blacks and Hispanics) in school and college attendance for
male members aged 15-24. Using longitudinal survey of youth in the USA for the
years 1979-1991 the study finds that disparities in family income largely account for
differentials in measured schooling attainment. While examining whether family
income influences schooling attendance they also find that family income is an
important predictor for schooling attendance of blacks and Hispanics. Using
1971 Canadian Census data on the income differentials of the employed adult aged
15 years and above in Canada, Richmond and Kalback (1980) show that Jewish have
higher level of income compared to other religious groups. The empirical findings
suggest that the differential can largely be explained by higher levels of education.
Regarding the external effect of ethnicity on human capital accumulation, it is argued
that productivity and quality of workers are influenced by socio-economic factors.
Persons raised in advantageous ethnic environments are exposed to socio-economic
factors that increase their productivity. The larger the amount of this exposure the
higher the quality of worker (Borjas, 1992, 1994, 1995). The earnings of children are
affected strongly not only by parental earnings, but also by the mean earnings of the
ethnic group in parents’ generation which Borjas (1995) call ethnic capital. Based on a
data from US Census, Borjas (1995) finds that residential segregation and the influence
of ethnic capital are intimately linked in the process of intergenerational mobility. The
influence of ethnic capital on the skills of the next generation arises, because the ethnic
capital variable is an excellent proxy for the socio economic background of the
neighborhood where children are raised and intergenerational mobility is influenced by
these neighborhood characteristics. Borjas (1992, 1995) argue that utility maximizing
parents invest in their children and ethnicity has an external effect on the production
of children’s skills. The human capital of children measured by their educational
attainment and wage rates depend not only on exogenous human capital of the parent,
but also on the average skill of the ethnic group in father’s generation. Borjas (1995)
observes that ethnic capital matters above and beyond neighborhood effects. If intra
group conflicts within a neighborhood are more frequent or are more influential than
inter-group conflicts, then ethnic capital might influence the intergenerational
mobility after controlling for neighborhood effects. Ethnicity per se has an impact on
intergenerational mobility.
According to Graafff and Groot (2004) individuals differ from each other in respect of
abilities, intelligence and knowledge. Therefore, they believe that human capital is
heterogeneous and assume that heterogeneity in a neighborhood has an adverse impact
on the development of human capital since the people in that neighborhood would face
difficulty in communicating with each other due to linguistic diversity. Hence, there
would be less flow of knowledge among the people of that neighborhood and human
capital accumulation would tend to be low. While analyzing costs and benefits of ghettos Caste and
with the help of a theoretical model, Cutler and Glaeser (1997) consider a city with three religious
groups – whites, skilled blacks and unskilled blacks. They assume that human capital
of children is a function of parent’s human capital as well as community’s human capital. diversity
The spillover effect of human capital takes place within a neighborhood rather than
across neighborhoods. The proposition they make from the theoretical framework is as
follows. If increased racial segregation results in increased segregation by skill within 169
black community then welfare of unskilled blacks would be reduced. The model,
moreover, infers that the effect in this respect on skilled blacks is ambiguous. The model
also shows that welfare of all blacks will be increased if increased racial segregation
results in less segregation by skill within the black community.
Our study tries to examine the impact of caste and religious diversity on human
capital outcome and explores external effect of ethnic capital on human capital
accumulation. Based on a field survey in the state of West Bengal in India, this study
hypothesize that:
.
more heterogeneous localities along caste and religious dimensions have
lower outcome of per capita education after controlling the effect of per capita
income; and
.
ethnic capital plays an important role for higher accumulation process of
per capita average level of schooling in more homogenous localities.

Data set and survey design

The census report of India reveals that social fragmentation of state of West Bengal is
mainly shaped under caste and religious lines. According to 2001 Census, 23.02 and
5.5 per cent of total population of West Bengal are Scheduled Caste (SC) and Scheduled
Tribes (ST), respectively. The data on literacy rates show that 59 per cent of SC and
43 per cent of ST are illiterate in West Bengal. In addition to this, there exists a large
amount of gender gap in respect of literacy rates among both SC and ST. The work
participation rates (WPR) for SC and ST are also low as compared to the national
averages. According to Census 2001, WPR in West Bengal for SC and ST are 38.8 and
48.8 per cent, respectively. Both the percentages are lower than the national averages.
The percentages are 40.4 for SC and 49.1 for ST at all India level.
Turning to the issue of religious diversity, majority of population are Hindus in
West Bengal according to Census of West Bengal 2001. Muslim also has a sizeable
population. The other religious communities are Christians, Buddhists, Sikhs and
Jains, which are termed as minority communities. Hindus, the principal religion in
West Bengal, constitute about 72.5 per cent of total population whereas Muslims
comprise 25 per cent. After Jammu & Kashmir and Assam, West Bengal has a sizeable
proportion of Muslim population. The state accounts for about 15 per cent of the total
Muslim population of India. Muslims of West Bengal have poorer socio-economic
conditions as compared to Hindus.
In keeping with this fragmented character of social structure based on caste and
religious lines, a field survey was under taken in which 440 respondents belonging to
440 households were interviewed in four municipalities of West Bengal – one each for
most homogeneous and most heterogeneous along caste dimension and the equal
number along religious line. For a cross sectional study of 440 respondents during
one-year period between January and December 2006, this study considers stratified
HUM random sampling method (a mixture of both purposive and random sampling). The
27,3 selection of four municipalities and then four municipal wards from four municipalities
were done by purposive method. But the section of sub samples (respondents) within
each ward depends purely on chance. First, we select 28 municipalities that had a 2001
population of one lakh or more along caste dimension based on the Census report of
West Bengal 2001 (Sengupta and Sarkar, 2007, p. 3315) and 14 municipalities that had
170 a 1991 population of one lakh or more based on the Census report of West Bengal 1991
along religious dimension[3]. Second, caste and religious heterogeneity are measured
using an index of fractionalization, ETHNIC. The index calculates the probability that
two randomly chosen individuals will not belong to the same group. The index is
obtained by subtracting the sum of squares of the relative population shares of each
group from one[4]. Using ETHNIC four municipalities were selected – one each for
most homogeneous and most heterogeneous municipalities along caste dimension and
the equal number for religious dimension (Sengupta and Sarkar, 2007, p. 3315). Third,
one municipal ward from each of the four municipalities selected at the first stage,
is also selected by purposive method. The procedure of selecting four municipal wards
is similar to that of four municipalities. ETHNIC was also used for selecting four
municipal wards from four municipalities, selected at the first stage. Under the
same dimension (caste/religion), the most heterogeneous ward was selected from
most heterogeneous municipality, most homogeneous ward was selected from most
homogeneous municipality. It is relevant to mention that ETHNIC shows that
more groups a country has, the higher the index and the more equally distributed the
groups, the higher also the index. The heterogeneous structure (based on both religion
and caste) of West Bengal municipalities satisfies the latter character of ETHNIC.
Although there are three caste groups and seven religious groups as per Census of
West Bengal, the number of population along caste or religious dimensions has usually
tended to be bipolar[5]. According to the cleavage of caste structure of West Bengal
municipal wards, the highest ETHNIC (0.6658) signifies the bipolar character of
diversity among population. Out of three caste groups, there are two equal groups
constituting over 95 per cent of population. The lowest value of ETHNIC (0.1536) along
caste line is referred to be unipolar in which one group is overwhelmingly dominant
which constitutes over 90 per cent of population. Similar is the case for population
structure of West Bengal municipal wards along religious line. The highest value of
ETHNIC (0.5859) along religious dimension signifies bipolar character. Out of seven
religious groups as per Census of West Bengal, there are two equal religious groups
constituting over 90 per cent of population. The lowest value of ETHNIC (0.1719) is
referred to be unipolar in which one group along religious line constitutes over
90 per cent of population (Sengupta and Sarkar, 2007, p. 3315). Fourth, the selection of
households from each municipal ward depends purely on chance (simple random
sampling without replacement). The number of households selected from most
heterogeneous caste-based municipal ward, most homogenous caste-based municipal
ward, most heterogeneous religion-based municipal ward and most homogenous
religion based municipal ward are 80, 80, 140 and 140, respectively. As one individual
(respondent) from each household is selected for our survey, the number of individual
(respondent) is synonymous with number households in our study. While considering
sample from each municipal ward along caste or religious dimension, the sample was
equally drawn for all religious groups, but for caste, 50 per cent were taken from
“Others” caste category and the rest was equally distributed among “SC” and “ST”. As Caste and
majority of population in West Bengal belong to “Others” caste category as per the religious
Census of India, 50 per cent sample were taken from “Others” caste category and the
rest was equally distributed among SC and ST category. Out of three caste groups, diversity
the number of sample under each of SC and ST caste group is 20 and for “Others” caste
group, it is 40 taken from each of the two municipal wards along caste dimension.
Likewise, out of the seven religious groups as per Census of West Bengal, the number 171
of sample for each religious group is 20 taken from most homogeneous and most
heterogeneous municipal ward along religious dimension. Hence, out of total sample of
440 individuals, the distribution for SC is 40, for ST it is 40, for Others the number is
80 and for each religious group it is 40. In order to examine our stated objectives, this
study considers household level data on average years of schooling, secondary level of
education, primary level of education, per capita household income and other factors
related to this study, all in per capita terms.

Methodology
An ethnic diversity index and some econometric regression models are used for this
study. To measure ethno-linguistic diversity of the world population, the ethno-linguistic
fractionalization (ELF) index was developed in 1964 by Soviet Social Scientists.
Subsequently, Taylor and Hudson (1972) computed an ELF index, which has been
employed as a standard measure of ethnic diversity. ELF measures the probability that
two randomly selected persons in a country belong to different ethno-linguistic groups.
As a tool for measuring ethnic diversity, Mauro (1995) first introduced ELF (or ethnic
fractionalization index, ETHNIC) to economic literature. Following the theoretical and
empirical study of the relevant literature, ETHNIC or ethnic fractionalization index is
calculated by the procedure adopted by Taylor and Hudson (1972):
1
2
X ni
ETHNIC ¼ 1 2 ; i ¼ 1; . . .I
i¼1
N

where ni is the number of people in the ith group, N is the population and I is the number
of groups in different localities. ETHNIC measures the probability that two randomly
selected persons in a county will not belong to the same group. According to this index
the more groups a country has the higher the index and the more equally distributed the
groups are, the higher also be the value of index (Bangura, 2006, p. 301).
We restrict our analysis to caste and religious diversity based on Census of
West Bengal. First, a caste-based measure of heterogeneity is constructed where the
population is divided into three groups. These are SC, ST and Others. Second,
fractionalization index based on religion is constructed according to the aforementioned
formula. Seven religious groups have been considered for constructing this index. These
are Hindu, Muslim, Christian, Sikh, Buddhist, Jains and “Others & Not Stated”. It is
relevant to mention that the two religious categories – “Others” and “Not Stated” – have
been clubbed together while calculating fractionalization index based on religion. This is
done due to the fact that number of population under the two above mentioned religious
categories are very less according to the census of West Bengal 1991. In keeping with the
survey design fractionalization indices based on caste and religion are measured in
two steps – municipality level and individual municipal ward level.
HUM In addition to the index of fractionalization adopted by Taylor and Hudson (1972),
there are other indices for measuring degree of fragmentation among population. The
27,3 index of polarization has been developed by Esteban and Ray (1994). According to this
index, a society with more intra-group homogeneity exhibits greater phenomenon of
polarization. A polarized population in a society must exhibit three basic features.
First, incidence of high degree of homogeneity within each group. Second, high degree
172 of heterogeneity across groups. Third, existence of small number of significantly sized
groups. The index of ethnic dominance formulated by Collier and Hoeffler (2001)
divides societies into two types of groups – highly fractionalized groups and majority
groups. They argued that societies, which have more majority groups compared to the
fractionalized groups, are more conflicting in nature. Mozaffar et al. (2003) proposes an
index of ethno political group concentration for studying voter behavior and formation
of parties in Africa. Fearon (2002) develops index of cultural fractionalization where he
introduces the concept of cultural distance between ethnic groups.
The index of polarization seems to be problematic for our research work since the
value of the index increases with a few large homogenous groups. On the other hand,
the index of ethnic dominance implies that a country with a majority group will have
more problems than another country where there is no majority group. Similarly,
the ethno political fractionalization index and the cultural fractionalization index
are problematic. Democratization tends to politicize all groups even when there is no
organization to aggregate group choices. It is also questionable the view that some
groups are not ethno political (Fearon, 2002). As regards cultural fractionalization
index is concerned, there is a lot of subjectivity in constructing the cultural
fractionalization index (Fearon, 2002). This research work, therefore, considers ethnic
fractionalization index as a basis for measurement of caste and religious diversity
which seems to be more plausible index for the measurement of existing social
fragmentation of West Bengal state in Indian context.
While exploring the impact of caste and religious differentiation on human capital
outcome, we consider the following econometric model:
PCAYS ¼ l0 þ l1 E þ l2 INC þ 11 ð1Þ
PCSLE ¼ b0 þ b1 E þ b2 INC þ 12 ð2Þ
PCPLE ¼ a 0 þ a1 E þ a2 INC þ 13 ð3Þ
In order to examine the marginal effect of E (the main independent variable) primary
regression model in each regression equation is bivariate, where E is the only
independent variable. Next, we examine the impact of E after controlling the INC
(average monthly per capita household income) susceptive of influencing per capita
average years of schooling (PCAYS)/per capita secondary level of education
(PCSLE)/per capita primary level of education (PCPLE).
For examining the external effect of ethnicity on human capital accumulation
process, following Borjas (1995), the econometric model underlying this analysis is
given by[6]:
SKILLC ij ¼ a 0 þ a1 ETHCAP j þ a2 SKILLP ij þ 1ij ð4Þ
where SKILLC ij is average per capita years of schooling of person i in ethnic group j;
ETHCAP j gives the average skills of ethnic group in the father’s generation
(which is called as ethnic capital). It is to be noted that ETHCAP j takes the same value Caste and
for all persons in group j. SKILLP ij gives the average years of schooling of her father.
To calculate ethnic capital (ETHCAP ij ), the econometric model is given by:
religious
X diversity
SKILLP ij ¼ Z ij a þ gj Gij þ 1ij ð5Þ
j

where SKILLP ij gives the average years of schooling of person i in group j; Z ij is a

173
vector of socio economic characteristics including age, region of residence and Gij is
dummy variable which takes the value 1 if person i belongs to group j. The parameter
vector (g1 ; g2 ; . . . ; gJ ) gives the empirical measure of ethnic capital for J groups.

Result and discussion

We are interested in the effect of caste and religious diversity on human capital
outcome and also the external effect of ethnic capital on human capital accumulation
process. We present descriptive statistics for the variables – per capita average years
of schooling, PCAYS; per capita primary level education, PCPLE; per capita secondary
level of education, PCSLE; caste or religious diversity (E), income (INC) – considered
for cross sectional study on households level in most homogenous and most
heterogeneous municipalities along caste (Table I) and religious dimensions (Table II).
The values of mean, median, standard deviation and range (maximum and minimum)
given in parenthesis and without parenthesis present descriptive statistics of variables
under most homogenous and most heterogeneous municipal wards, respectively, along
caste and religious dimensions. The study considers two extreme values of E – 0 and
1:1 represents all samples under most heterogonous municipal wards along caste and
religious dimensions and the 0 indicates all samples under most homogenous
municipal wards along the same dimensions. Such variables (0 or 1) are essentially a
device to classify data into mutually exclusive categories[7]. The tables show that
homogenous municipal wards have higher level of per capita education – primary,
secondary and average years of schooling – than heterogeneous municipal wards for
both caste and religious dimensions of diversity.

Mean Median Min. Max. STD No. of Obs.

E 1 1 1 1 0 80
(0) (0) (0) (0) (0) (80)
INC 545.125 434.5 81 1,648 395.18124 80
(1,119.925) (1,346) (221) (1,893) (522.8061) (80)
PCAYS 2.906156 2.666667 1.111111 8.5 1.15375 80
(8.252438) (8.25) (4.375) (13) (1.212526) (80)
PCPLE 1.983231 1.845238 0.444444 7 0.937227 80
(3.667222) (4) (2) (5) (0.702136) (80)
PCSLE 2.264983 2.083333 1.111111 6 0.804704 80
(6.906508) (7) (3.111111) (10) (1.185858) (80)
Notes: E, ethnicity; INC, house hold income per capita; PCAYS, per capita average years of schooling; Table I.
PCPLE, per capita average primary level education; PCSLE, per capita secondary level of education; Descriptive statistics
figures without and within parenthesis represent house hold level values for heterogeneous and of variables along caste
homogenous municipal wards, respectively dimension
HUM
Mean Median Min. Max. Std No of Obs.
27,3
E 1 1 1 1 0 140
(0) (0) (0) (0) (0) (140)
INC 353.4786 344 81 919 150.1366 140
(697.0929) (561.5) (127) (1,702) (419.3649) (140)
174 EDU 2.906156 2.666667 1.111111 8.5 1.15375 140
(8.252438) (8.25) (4.375) (13) (1.212526) (140)
PCPLE 1.983231 1.845238 0.444444 7 0.937227 140
(3.667222) (4) (2) (5) (0.702136) (140)
PCSLE 2.264983 2.083333 1.111111 6 0.804704 140
Table II. (6.906508) (7) (3.111111) (10) (1.185858) (140)
Descriptive statistics of
variables along religious Note: Figures without and within parenthesis represent house hold level values for heterogeneous and
dimension homogenous municipal wards, respectively

In order to examine empirically the impact of caste and religious diversity (E) on
human capital of current generation, we first consider the estimation of the impact of
E on per capita average years of schooling along caste dimension of ethnicity. The
heteroscedasticity corrected estimation results are presented in Models (1) and (2) of
Table III. In the primary regression model (Model 1), E is the only independent variable
affecting per capita average years of schooling. Model (2) of Table III measures the
average years of schooling outcomes of two input variables (E, INC). Regression
Models (1) and (2) in Table III show that the coefficients of E are of negative sign as
expected (per capita average years of schooling decreases with higher E) and
significant, the level of significance being at 1 per cent levels in both the models. The
coefficient of income (INC) in Model (2) is of expected (positive) sign but it is
insignificant. This suggests that E is the only important determinant for the per capita
average years of schooling. As regards R 2 is concerned, the value of R 2 in Models (1)
and (2) of Table III are moderate and lies between 0.6159 and 0.6182. Moreover, there is
no serious problem of multicollinearity in Table III. Similarly results of Table IV
(estimates of per capita secondary level of education), Table V (estimates of per capita
primary level of education) are also in conformity with the findings of Table III.
The results of estimation of human capital formation along religious dimensions
(Tables VI-VIII) are also in conformity with the findings of the results of the human

1 2

E 20.7833361 2 0.7534653
(215.82) * (2 11.74) *
INC 0.0374107
(0.96)
R2 0.6159 0.6182
No. of Obs. 160 160
Table III. Notes: *Indicates that t values are significant at 1 per cent level; heteroskedasticiy corrected
Effect of caste diversity t statistics are in parentheses; HC3 criterion has been used for correcting heteroskedasticity; HC3
on per capita average criterion does not produce adjusted R 2; hence R 2 has been reported in case of regression based on
years of schooling cross section data
 Caste and
1 2
religious
E 20.6184083 2 0.5703931 diversity
(211.53) * (2 8.61) *
INC 0.060135
(1.49)
R2 0.4598 0.4669 175
No. of Obs. 160 160
Notes: *Indicates that t values are significant at 1 per cent level; heteroskedasticiy corrected Table IV.
t statistics are in parentheses; HC3 criterion has been used for correcting heteroskedasticity; HC3 Effect of caste diversity
criterion does not produce adjusted R 2; hence R 2 has been reported in case of regression based on on per capita secondary
cross section data level of education

1 2

E 2 0.4853678 2 0.4746535
(2 10.52) * (2 8.06) *
INC 0.0134188
(0.35)
R2 0.4150 0.4155
No of Obs. 160 160
Notes: *Indicates that t values are significant at 1 per cent level; heteroskedasticiy corrected Table V.
t statistics are in parentheses; HC3 criterion has been used for correcting heteroskedasticity; HC3 Effect of caste diversity
criterion does not produce adjusted R 2; hence R 2 has been reported in case of regression based on on per capita primary
cross section data level of education

1 2

E 21.094141 2 1.064738
(234.72) * (2 30.13) *
INC 0.0505263
(1.85) *
R2 0.8137 0.8157
No. of Obs. 280 280
Table VI.
Notes: *Indicates that t values are significant at 1 per cent level; heteroskedasticiy corrected Effect of religious
t statistics are in parentheses; HC3 criterion has been used for correcting heteroskedasticity; HC3 diversity on per capita
criterion does not produce adjusted R 2; hence R 2 has been reported in case of regression based on average years of
cross section data schooling

capital formation along caste dimension. Results of Tables VI-VIII show that religious
diversity (E) does matter for lower level of per capita average years of schooling,
per capita secondary level of education and per capita primary level of education in
both the Models (1) and (2) and they are significant at 1 per cent levels in all cases.
There is no serious problem of multicollinearity in Tables VI-VIII. As regards the
values of R 2 are concerned, the values of R 2 in all models are appearing from moderate
to high (ranging between 0.5115 and 0.8446).
HUM We now attempt to examine the external effect of caste and religious diversity on
27,3 human capital accumulation process. This study considers the econometric model of
Borjas (1995) in exploring the external effect of caste and religious diversity on human
capital accumulation process. In this perspective, Tables IX and X present descriptive
statistics of variables – per capita skill of current generation (SKILLC), per capita skill
of parent (SKILLP) and average skill of ethnic group in father’s generation, i.e. ethnic
176

1 2

E 2 1.14689 2 1.119885
(2 38.50) * * * (2 32.80) * * *
INC 0.0464074
(1.66)
R2 0.8430 0.8446
No of Obs. 280 280
Table VII.
Effect of religious Notes: *Indicates that t values are significant at 1 per cent level; heteroskedasticiy corrected
diversity on per capita t statistics are in parentheses; HC3 criterion has been used for correcting heteroskedasticity; HC3
secondary level of criterion does not produce adjusted R 2; hence R 2 has been reported in case of regression based on
education cross section data

1 2

E 20.6871088 2 0.6363142
(217.00) * (2 13.86) *
INC 0.0872884
(2.44) *
R2 0.5115 0.5209
No. of Obs. 280 280
Table VIII.
Effect of religious Notes: *Indicates that t values are significant at 1 per cent level; heteroskedasticiy corrected
diversity on per capita t statistics are in parentheses; HC3 criterion has been used for correcting heteroskedasticity; HC3
primary level of criterion does not produce adjusted R 2; hence R 2 has been reported in case of regression based on
education cross section data

Mean Median Min. Max. STD No. of Obs.

ETHCAP 1.162125 1.25 1.06 1.63 0.108764 80

(3.65025) (3.66) (3.15) (3.66) (0.059192) (80)
SKI LLC 3.424063 3 1.833333 11 1.567485 80
(7.209747) (6.7) (4.166667) (11.2) (1.886587) (80)
SKILLP 1.4625 1 1 4 0.673997 80
(5) (5) (1) (11) (2.221871) (80)
Table IX.
Descriptive statistics Notes: ETHCAP, average skill of ethnic group in father’s generation, i.e. ethnic capital; SKILLC,
of variables along caste per capita skill of current generation; SKILLP, per capita skill of parent; figures without and within
dimension parenthesis represent values for heterogeneous and homogenous municipal wards, respectively
capital (ETHCAP) for cross sectional study on individual samples in most Caste and
heterogeneous and most homogenous municipal wards along caste and religious religious
dimensions, respectively. The values of mean, median, standard deviation and range
(maximum and minimum) with and without parenthesis represent descriptive statistics diversity
of variables under homogenous and heterogeneous municipal wards, respectively, along
caste and religious dimensions. Tables IX and X show that the mean levels of skill
variables – SKILLC, SKILLP and ETHCAP – have high scores in homogenous wards 177
than heterogeneous ones along both caste and religious dimensions.
In order to calculate ethnic capital (ETHCAP), following Borjas (1995, p. 377)
this study considers a regression equation (mentioned in the Methodology chapter),
where per capita average years of schooling of father act as the dependent variable
and socio-economic characteristics (like age, region) and a set of dummy variables
representing group in which an individual belongs to act as independent variables of
regression. The estimated coefficients of the set of dummy variables give the empirical
measure of ethnic capital for different caste and religious groups. The regression result
gives three measures of ethnic capital each for SC, ST and “Others” along caste
dimension and seven measures of ethnic capital along religious dimension each for
Hindu, Muslim, Buddhists, Sikhs, Jains, Christians and “Others & Religion Not Stated”.
We have worked out the above regression analysis for calculating ethnic capital to
each caste and religious group in both most homogenous and most heterogeneous
municipal wards in West Bengal. After doing this regression analysis, we have done
another regression analysis for estimating the effect of ethnic capital on per capita
average years of schooling of current generation after controlling parental education
along caste and religious dimension, respectively.
We first consider the estimation results of the effect of ethnic capital on per capita
average years of schooling along caste dimension. The results are presented in Models
(1) and (2) of Table XI. In primary regression model (Model (1)), ethnic capital
(ETHCAP) is the only independent variable. Afterwards, we add per capita skill of
parent (SKILLP) as another independent variable along with ethnic capital (ETHCAP).
Table XI shows that the coefficients of ETHCAP are of positive signs as expected
(per capita average years of schooling increases with higher ethnic capital) in all the
regression Models (1) and (2), and becomes significant at 1 per cent level. The results of
estimation of the average years of schooling along religious dimensions (Table XII)
show that the coefficients of ethnic capital (ETHCAP) are of positive signs in all the
models – 1 and 2 and it is significant at 1 per cent level in both the models. Tables XI
and XII show that after controlling skill of parent generation (SKILLP) ethnic capital

Mean Median Min. Max. STD No. of Obs.

ETHCAP 2 0.00448 0.01285 20.2576 0.1402 0.078635 140

(2.681293) (2.68) (2.607) (2.74) (0.020419) (140)
SKI LLC 2.906156 2.666667 1.111111 8.5 1.15375 140
(8.252438) (8.25) (4.375) (13) (1.212526) (140)
SKILLP 1.7375 1 1 5 1.040250092 140
(9.735714286) (10) (7) (16) (1.88370794) (140) Table X.
Descriptive statistics
Note: Figures without and within parenthesis represent values for heterogeneous and homogenous of variables along
municipal wards, respectively religious dimension
HUM has positive significant impact on the average skill of current generation along both
27,3 caste and religious dimensions, respectively. These results are also in conformity with
the findings of Tables III-VIII. The impact of ethnic spillovers that appears in Tables XI
and XII imply that the skills of children along both caste and religious dimensions
depend not only on parent skills, but also on the mean skills of different caste or
religious groups in the parent generation. It suggests that much of the ethnic capital
178 effect along caste and religious dimensions work through the fact that low-income
groups (based on caste/religion) cluster to some low-income neighborhoods, which
might influence intergenerational mobility.
Table XIII summarizes all the regression results. It is organized as follows. The first
column identifies the dependent variables. The second and fourth columns report the
coefficients and t statistics of the estimated coefficients of variable E in two different
regressions that are identical to regression 1 (no control) and regression 2 (all controls)
as reported in full in Tables III-XII.

Conclusion
This study lends credence to the fact that heterogeneous localities along caste and
religious dimensions have lower level of per capita education which in turn results in the
lower outcome of human capital after controlling the effect of per capita income. Moreover,
the external effect of ethnic capital among heterogeneous localities along both caste and

1 2

ETHCAP 0.3119334 0.30997

(15.55) * (9.19) *
SKILLP 0.0040137
(0.07)
R2 0.6076 0.6076
No. of Obs 160 160
Table XI.
External effect of caste Notes: *Indicates that t values are significant at 1 per cent level; heteroskedasticity corrected
diversity on human t statistics are in parentheses; HC3 criterion has been used for correcting heteroskedasticity; HC3
capital along caste criterion does not produce adjusted R 2; hence R 2 has been reported in case of regression based on
dimension cross section data

1 2

ETHCAP 0.4071766 0.4027437

(33.35) * (10.28) *
SKILLP 0.0065736
(0.12)
R2 0.8084 0.8084
No. of Obs. 280 280
Table XII.
External effect of Notes: *Indicates that t values are significant at 1 per cent level; heteroskedasticity corrected
religious diversity on t statistics are in parentheses; HC3 criterion has been used for correcting heteroskedasticity; HC3
human capital along criterion does not produce adjusted R 2; hence R 2 has been reported in case of regression based on
religious dimension cross section data
 Caste and
Dependent variable 1 (no control) Adj. R 2 2 (all control) Adj. R 2 Obs.
religious
Caste diversity
PCAYS 2 0.7833361 0.6159 2 0.7534653 0.6182 160
(2 15.82) * (2 11.74) *
PCSLE 2 0.6184083 0.4598 2 0.5703931 0.4669 160
(2 11.53) * (2 8.61) * 179
PCPLE 2 0.4853678 0.4150 2 0.4746535 0.4155 160
(2 10.52) * (2 8.06) *
Religion
PCAYS 2 1.094141 0.8137 2 1.064738 0.8157 280
(2 34.72) * (2 30.13) *
PCSLE 2 1.14689 0.8430 2 1.119885 0.8446 280
(2 38.50) * (2 32.80) *
PCPLE 2 0.6871088 0.5115 2 0.6363142 0.5209 280
(2 17.00) * (2 13.86) *
External Effect of diversity on human capital
Caste
PCAYS 0.3119334 0.6076 0.30997 0.6076 160
(15.55) * (9.19) *
Religion Table XIII.
PCAYS 0.4071766 0.8084 0.4027437 0.8084 280 Summary of the effect
(33.35) * (10.28) * of caste and religious
diversity on human
Note: *Indicates that t values are significant at 1 per cent level capital

religious dimensions has lower outcome of human capital accumulation process.

As the improvement of human capital is said to have positive impact on economic growth
(Romer, 1990; Barro, 1991; Mankiw et al., 1992; Benhabib and Speigel, 1994), the lower
human capital accumulation in the heterogeneous localities along caste and religious
dimensions might play an adverse effect on economic growth, worsen a society by
increasing crime, make markets inefficient, produce adverse effect on technological
breakthroughs and reduce the arts and science. So, institutional measures by government
and non-government sources can improve the stock of human capital particularly in the
heterogeneous localities, which might have positive impact on higher socio-economic
outcome in those localities.

Notes
1. Wilson (1987, 1996), Easterly and Levine (1997), Luttmer (1997), Mauro (1995), Annett (1999),
Shleifer and Vishny (1993), LaPorta et al. (1998), Ake (1993), Cutler and Glaeser (1997), Barro
(1999), Svensson (1998), Ritzen et al. (2001), Alesina et al. (1999, 2003), Alesina and La Ferrara
(2000, 2005), Ottaviano and Peri (2004), Montalvo and Querol (2005), Bahry et al. (2005).
2. Ethnic differentiation does not manifest in same ethnic characteristics in all countries of the
world. In India, the most populated country in South Asia, the current upper versus lower
castes or Hindu versus Muslim conflicts is, in a significant sense, a variant of the modern
problem of ethnicity or race; but it is seldom entertained in discussions in the western media
(Chakravorty, 1995, p. 3374). Although India is ethnically fragmented along religious, cultural
and linguistic lines, the caste system further convolutes ethnic fragmentation by creating a
pecking order or pyramid within the society. From the 1890s onward, ethnic strife in India has
spilled blood in large amount at different points in history. The upper and lower castes, Hindus
HUM and Muslims in India, both during and after British rule, have become competitive block
of ethnicity in the public sphere and political lives (Chakravorty, 1995, p. 3377). Recent
27,3 problems in Kashmir, North Eastern India, Bihar, Uttar Pradesh and other parts of India have
been particularly glaring. Whatever the cause of partition of our country, ethnic conflict is
there (Engineer, 1997, p. 2108). The rise of Hinduvta in Indian politics has further intensified
religious conflicts. Political analysts dealing with elections have opined that India is a
caste-ridden society and the voters tend to vote on caste lines (Chakravorty, 2000, p. 3805;
180 Sengupta and Sarkar, 2007, p. 3313).
3. Population under different religious categories at municipal level in 2001 West Bengal
Census is not available. Therefore, analysis has been done on the basis of 1991 Census.
4.
1
2
X ni
ETHNIC ¼ 1 2 ; i ¼ 1; . . .I
i¼1
N

where ni is the number of people in the ith group, N is the population and I is the number of
caste/religious based groups in the municipalities. Here i ¼ (SC, ST, others). For religion,
i ¼ (Hindu, Muslims, Christians, Sikhs, Buddhists, Jains and “Others & religion Not
Stated”).
5. The bipolar divide on caste or religion has also politicized the social structure of
West Bengal. The discourse and politics of India on caste or religion has more tended to be
bipolar (Bangura, 2006, pp. 316-18).
6. The spillover effects underlying the ethnic capital model have much in common with the
human capital externalities on economic growth (Romer, 1986; Lucas, 1988).
7. Variables that assume such 0 and 1 values are called qualitative or dummy variables which
are described as nominal scale variables (not a natural scale of measurement).

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Further reading
Census of India (1971), Series 0.22, West Bengal, Part II (A), General Population Tables, Registrar 183
General and Census Commissioner, Government of India.
Census of India (1971), Series 0.22, West Bengal, Part II-C (i), Social and Cultural Tables,
Registrar General and Census Commissioner, Government of India.
Census of India (1981), Series 23, West Bengal, Paper 1 of 1984, Table HH-15 (House Hold
Population by Religion of Head of House Hold), Registrar General and Census
Commissioner, Government of India.
Census of India (1981), Series 23, West Bengal, Part II (B), Primary Census Abstract, Registrar
General and Census Commissioner, Government of India.
Census of India (1991), Paper 1 of 1995, Registrar General and Census Commissioner,
Government of India.
Census of India (1991), Series 1, India, Part IV-B (II), Table C-9, Registrar General and Census
Commissioner, Government of India.
Census of India (1991), Series 26, West Bengal. Part II-B (I), Primary Census Abstract, Registrar
General and Census Commissioner, Government of India.
Census of India (2001), Series 1, India, Primary Census Abstracts, Table A-9, Scheduled Tribes,
Registrar General and Census Commissioner, Government of India.
Census of India (2001), Series 20 (1), West Bengal. Primary Census Abstract, Registrar General
and Census Commissioner, Government of India.
Census of India (2001), Series 1, India, Final Population Totals, Registrar General and Census
Commissioner, Government of India.
Census of India (2001), Table C-8, Socio Cultural Tables, Registrar General and Census
Commissioner, Government of India.
Municipal Statistics of West Bengal (1994-1995 to 2005-2006), Table I, Statement Showing
Particulars of Constitution, Population, Year of Establishment, Number of Rate Payers and
Percentage of Rate Payers to Population of each Municipality in West Bengal, Bureau of
Economics and Statistics, Government of West Bengal.
Municipal Statistics of West Bengal (1994-1995 to 2005-2006), Table II, Statement Showing
Income of the Municipalities in West Bengal, Bureau of Economics and Statistics,
Government of West Bengal.
Municipal Statistics of West Bengal (1994-1995 to 2005-2006), Table III, Statement Showing
Expenditure of the Municipalities in West Bengal, Bureau of Economics and Statistics,
Government of West Bengal.

Corresponding author
Jhumur Sengupta can be contacted at: jhumursengupta@yahoo.com

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