  Hofstede's six cultural dimensions make it possible to measure the culture of
countries but are criticized for assuming the homogeneity of each country. In
this paper, we propose two measures based on Hofstede's cultural dimensions
which take into account the heterogeneous structure of citizens with respect to
their countries of origin. Using these improved measures, we study the
influence of heterogeneous culture and cultural diversity on the quality of
institutions measured by the six worldwide governance indicators. We use a
linear regression model allowing for dependence in spatial and temporal
dimensions as well as high correlation between the governance indicators. Our
results show that the effect of cultural diversity improves some of the
governance indicators while worsening others depending on the individual
Hofstede cultural dimension.
