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The political economy of ethnicity

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  • Paul Collier

Abstract

The paper investigates the effects of ethnic diversity on economic performance and the risk of violent conflict. Diversity has various detrimental microeconomic effects, tending to reduce public sector performance, increase patronage, and lower the level of trust among individuals. However, whether diversity adversely affects overall economic growth depends upon the political environment. Diversity is highly damaging to growth in the context of limited political rights, but is not damaging in democracies. The same relationship holds for the satisfactory performance of World Bank projects: in diverse societies, the risk of project failure is nearly doubled by the absence of political rights. There is a relationship between ethnic diversity and the risk of violent conflict, but it is non-monotonic. Those societies most at risk are the ones in the middle of the range of ethnic diversity. Highly diverse societies, such as are typical of Africa, are actually even safer than homogenous societies. A democratic Africa can thus reap the benefits which ethnic diversity provides in terms of a reduced risk of violence, while avoiding the potential costs of reduced growth. Both income levels and political rights are also important influences on the risk of violent conflict, and of its escalation into full civil war. Once a society has reached full scale civil war the balance of influences appears to change. The persistence of conflict, and the sustainability of a settlement, are more dependent upon ethnic composition and less dependent upon income and political rights, than are the initiation and escalation of violence. Hence, some peace settlements may need to change borders so as to increase (or reduce) the ethnic diversity of the state.

Suggested Citation

  • Paul Collier, 1998. "The political economy of ethnicity," CSAE Working Paper Series 1998-08, Centre for the Study of African Economies, University of Oxford.
  • Handle: RePEc:csa:wpaper:1998-08
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    File URL: http://www.csae.ox.ac.uk/materials/papers/9808text.pdf
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    Cited by:

    1. Bohn, Frank, 2007. "Polarisation, uncertainty and public investment failure," European Journal of Political Economy, Elsevier, vol. 23(4), pages 1077-1087, December.
    2. Englebert, Pierre, 2000. "Solving the Mystery of the AFRICA Dummy," World Development, Elsevier, vol. 28(10), pages 1821-1835, October.
    3. Janine Aron, 2003. "Building institutions in post-conflict African economies," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(4), pages 471-485.
    4. Mark Gradstein & Moshe Justman, 2002. "Education, Social Cohesion, and Economic Growth," American Economic Review, American Economic Association, vol. 92(4), pages 1192-1204, September.
    5. Ranis, Gustav, 2010. "Diversity of Communities and Economic Development: An Overview," Working Papers 6, JICA Research Institute.
    6. Seth Norton, 2000. "The Cost of Diversity: Endogenous Property Rights and Growth," Constitutional Political Economy, Springer, vol. 11(4), pages 319-337, December.
    7. Bodea, Cristina & Elbadawi, Ibrahim A., 2008. "Political violence and economic growth," Policy Research Working Paper Series 4692, The World Bank.
    8. Kim, Daniel & Baum, Christopher F. & Ganz, Michael L. & Subramanian, S.V. & Kawachi, Ichiro, 2011. "The contextual effects of social capital on health: A cross-national instrumental variable analysis," Social Science & Medicine, Elsevier, vol. 73(12), pages 1689-1697.
    9. Dana Schüler & Julian Weisbrod, 2010. "Ethnic fractionalisation, migration and growth," Empirical Economics, Springer, vol. 39(2), pages 457-486, October.
    10. Efendic, Adnan & Pugh, Geoffrey T., 2017. "Ethnic diversity and economic performance: An empirical investigation using survey data," Economics Discussion Papers 2017-57, Kiel Institute for the World Economy (IfW).
    11. Esfahani, Hadi Salehi & Ramirez, Maria Teresa, 2003. "Institutions, infrastructure, and economic growth," Journal of Development Economics, Elsevier, vol. 70(2), pages 443-477, April.
    12. Leonardo A. Gatica Arreola, 2012. "¿Por qué el distanciamiento ideológico disminuye la provisión de bienes públicos?; una explicación basada en el empleo clientelar," Estudios de Economia, University of Chile, Department of Economics, vol. 39(1 Year 20), pages 27-51, June.
    13. Kim, Kwang-ho, 2007. "Favoritism and reverse discrimination," European Economic Review, Elsevier, vol. 51(1), pages 101-123, January.

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