In this study we argue that geographical clustering of languages is an important determinant of economic performance along with linguistic polarization, but not linguistic diversity. We posit that higher levels of linguistic clustering represents lower intra-group coordination costs that help mobilize productive resources. Our empirical analysis based on the linguistic and economic data for Indonesia implies that contrary to the findings of Montalvo and Reynal-Querol (2005) even highly polarized societies are not necessarily prone to conflict if they are spatially dispersed.