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Peripheral Diversity: Transfers versus Public Goods

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  • Desmet, Klaus
  • Ortuño-Ortín, Ignacio
  • Weber, Shlomo

Abstract

This paper advances the hypothesis that in societies that suffer from center-periphery tension it is harder to agree on public goods than on transfers. After micro-founding a new peripheral diversity index, it puts forth a simple theory in which the cost of public goods increases with peripheral diversity and tax compliance decreases with overall diversity. It then empirically explores the relation between public goods provision, transfers, peripheral diversity and overall diversity. Consistent with the theory, we find that higher levels of peripheral diversity are associated with less provision of public goods, but more transfers, whereas higher levels of overall diversity have a negative association with transfers. Public goods and transfers are therefore substitutes in their reaction to a change in peripheral diversity.

Suggested Citation

  • Desmet, Klaus & Ortuño-Ortín, Ignacio & Weber, Shlomo, 2016. "Peripheral Diversity: Transfers versus Public Goods," CEPR Discussion Papers 11348, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:11348
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    References listed on IDEAS

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    1. Quamrul Ashraf & Oded Galor, 2013. "The 'Out of Africa' Hypothesis, Human Genetic Diversity, and Comparative Economic Development," American Economic Review, American Economic Association, vol. 103(1), pages 1-46, February.
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    4. Desmet, Klaus & Ortuño-Ortín, Ignacio & Wacziarg, Romain, 2012. "The political economy of linguistic cleavages," Journal of Development Economics, Elsevier, vol. 97(2), pages 322-338.
    5. DESMET, Klaus & ORTUNO-ORTIN, Ignacio & WEBER, Shlomo, 2005. "Peripheral diversity and redistribution," LIDAM Discussion Papers CORE 2005044, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Klaus Desmet & Ignacio Ortuño-Ortín & Shlomo Weber, 2009. "Linguistic Diversity and Redistribution," Journal of the European Economic Association, MIT Press, vol. 7(6), pages 1291-1318, December.
    7. Ramón E. López & Vinod Thomas & Yan Wang, 2008. "The Quality of Growth," World Bank Publications, The World Bank, number 28198, July.
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    9. Marta Reynal-Querol, 2002. "Ethnicity, Political Systems, and Civil Wars," Journal of Conflict Resolution, Peace Science Society (International), vol. 46(1), pages 29-54, February.
    10. Fearon, James D, 2003. "Ethnic and Cultural Diversity by Country," Journal of Economic Growth, Springer, vol. 8(2), pages 195-222, June.
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    Cited by:

    1. Joseph Flavian Gomes, 2020. "The health costs of ethnic distance: evidence from sub-Saharan Africa," Journal of Economic Growth, Springer, vol. 25(2), pages 195-226, June.

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    More about this item

    JEL classification:

    • H4 - Public Economics - - Publicly Provided Goods
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • Z10 - Other Special Topics - - Cultural Economics - - - General

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