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Dynamic Ethnic Fractionalization and Economic Growth in the Transition Economies from 1989 to 2007

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Author Info

  • Campos, Nauro F

    ()
    (Brunel University)

  • Saleh, Ahmad

    ()
    (Brunel University)

  • Kuzeyev, Vitaliy S.

    ()
    (affiliation not available)

Abstract

In their survey of the literature on ethnic fractionalization and economic performance, Alesina and La Ferrara (JEL 2005) identify two main directions for future research. One is to improve the measurement of diversity and the other to treat diversity as an endogenous variable. This paper tries to address these two issues: it investigates the effects of ethnic fractionalization on economic growth across countries using unique time-varying measures. We first replicate the finding of a weak effect of exogenous diversity on growth and then we show that accounting for how diversity changes over time and treating it as an endogenous variable makes a difference. Once diversity is instrumented (with lagged diversity and latitude), it shows a significant negative impact on economic growth which is robust to different specifications, polarization measures, econometric estimators, as well as to the use of an index of ethnic-religious-linguistic fractionalization.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4597.

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Length: 28 pages
Date of creation: Nov 2009
Date of revision:
Publication status: published in: Journal of International Trade and Economic Development, 2011, 20 (2),129-152
Handle: RePEc:iza:izadps:dp4597

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Keywords: polarization; fractionalization; ethnic diversity; growth;

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  1. Woo, Jaejoon, 2003. "Social polarization, industrialization, and fiscal instability: theory and evidence," Journal of Development Economics, Elsevier, vol. 72(1), pages 223-252, October.
  2. Campos, Nauro F & Coricelli, Fabrizio, 2002. "Growth in Transition: What we Know, What we Don't and What we Should," CEPR Discussion Papers 3246, C.E.P.R. Discussion Papers.
  3. Alesina, Alberto & La Ferrara, Eliana, 2005. "Ethnic Diversity and Economic Performance," Scholarly Articles 4553005, Harvard University Department of Economics.
  4. Bluedorn, John C., 2001. "Can democracy help? Growth and ethnic divisions," Economics Letters, Elsevier, vol. 70(1), pages 121-126, January.
  5. Rachel M. McCleary & Robert J. Barro, 2006. "Religion and Economy," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 49-72, Spring.
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