Linguistic Diversity and Its Impact on Economic Policies and Political Decisions

The paper addresses the issue of linguistic diversity and its impact on economic policy and political decisions. Importance of the topic is illustrated by examination of optimal sets of official languages in the European Union. It is shown that alternative estimation methods of language disenfranchisement alter the order in which the languages enter the list of the official ones. Also, we present an overview of gametheoretic models of language acquisition, where individuals weigh costs and benefits of studying new languages. These models are used to predict actual distribution of language skills in a society and to compare it with the first-best outcome. The paper ends with estimation of our predictions on the basis of empirical analysis of European data.