IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

On the Role of Democracy in the Ethnicity-Growth Relationship: Theory and Evidence

  • Sugata Ghosh


  • Andros Gregoriou


  • Anirban Mitra


We study the relationship between ethnic diversity and economic performance and, in particular, focus on economic growth under democracy and dictatorship. We build a theory which emphasizes the public spending channel, and show that the relationship between public spending and ethnic diversity is qualitatively different under the two regimes. Our model also delivers that if the dictator is sufficiently corrupt, then growth is bound to be higher under a democracy irrespective of the degree of ethnicity. We then consider a panel of the most and least ethnically diverse nations and address potential endogeneity problems. Our empirical results robustly show that democracy has a significantly positive effect on growth, irrespective of the degree of ethnicity. We also show that the marginal effect of ethnicity on growth in the presence of democracy is always positive, irrespective of the type of estimator used. Finally, we establish that the negative marginal impact of increases in ethnicity can always be overcome by democracy.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Centre for Economic Development and Institutions(CEDI), Brunel University in its series CEDI Discussion Paper Series with number 13-02.

in new window

Length: 35 pages
Date of creation: Mar 2013
Date of revision:
Handle: RePEc:edb:cedidp:13-02
Contact details of provider: Postal: CEDI, Brunel University,West London,UB8 3PH,United Kingdom
Phone: +44 (0)1895 266649
Fax: +44 (0)1895 266649
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Torsten Persson & Guido Tabellini, 2006. "Democratic capital: The nexus of political and economic change," Working Papers 308, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  2. Alberto Alesina & Allan Drazen, 1989. "Why are Stabilizations Delayed?," NBER Working Papers 3053, National Bureau of Economic Research, Inc.
  3. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
  4. Alesina, Alberto & Baqir, Reza & Easterly, William, 1999. "Public goods and ethnic divisions," Policy Research Working Paper Series 2108, The World Bank.
  5. Atin Basuchoudhary & William Shughart, 2010. "On Ethnic Conflict And The Origins Of Transnational Terrorism," Defence and Peace Economics, Taylor & Francis Journals, vol. 21(1), pages 65-87.
  6. William Shughart, 2006. "An analytical history of terrorism, 1945–2000," Public Choice, Springer, vol. 128(1), pages 7-39, July.
  7. Alesina, Alberto & La Ferrara, Eliana, 2005. "Ethnic Diversity and Economic Performance," Scholarly Articles 4553005, Harvard University Department of Economics.
  8. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  9. Yang, Benhua, 2008. "Does democracy lower growth volatility? A dynamic panel analysis," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 562-574, March.
  10. Raquel Fernández & Gilat Levy, 2005. "Diversity and redistribution," LSE Research Online Documents on Economics 544, London School of Economics and Political Science, LSE Library.
  11. Devarajan, Shantayanan & Swaroop, Vinaya & Heng-fu, Zou, 1996. "The composition of public expenditure and economic growth," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 313-344, April.
  12. Sugata Ghosh & Andros Gregoriou, 2008. "The composition of government spending and growth: is current or capital spending better?," Oxford Economic Papers, Oxford University Press, vol. 60(3), pages 484-516, July.
  13. Hristos Doucouliagos & Mehmet Ulubasoglu, 2006. "Democracy and Economic Growth: A Meta-Analysis," Economics Series 2006_04, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  14. Rodrik, Dani & Alesina, Alberto, 1994. "Distributive Politics and Economic Growth," Scholarly Articles 4551798, Harvard University Department of Economics.
  15. Papaioannou, Elias & Siourounis, Gregorios, 2008. "Economic and social factors driving the third wave of democratization," Journal of Comparative Economics, Elsevier, vol. 36(3), pages 365-387, September.
  16. Amparo Castello Climent, 2006. "On the Distribution of Education and Democracy," Working Papers 0602, International Economics Institute, University of Valencia.
  17. repec:tpr:qjecon:v:112:y:1997:i:4:p:1203-50 is not listed on IDEAS
  18. Barro, Robert J, 1996. " Democracy and Growth," Journal of Economic Growth, Springer, vol. 1(1), pages 1-27, March.
  19. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  20. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, 02.
  21. John F. Helliwell, 1992. "Empirical Linkages Between Democracy and Economic Growth," NBER Working Papers 4066, National Bureau of Economic Research, Inc.
  22. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
  23. Pereira, Carlos & Teles, Vladimir Kuhl, 2009. "Political institutions as substitute for democracy: a political economy analysis of economic growth," Textos para discussão 196, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  24. Bluedorn, John C., 2001. "Can democracy help? Growth and ethnic divisions," Economics Letters, Elsevier, vol. 70(1), pages 121-126, January.
  25. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
  26. repec:chb:bcchwp:03 is not listed on IDEAS
  27. Schmidt, Peter, 1990. "Three-stage least squares with different instruments for different equations," Journal of Econometrics, Elsevier, vol. 43(3), pages 389-394, March.
  28. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
  29. Wittman, Donald, 1989. "Why Democracies Produce Efficient Results," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1395-1424, December.
  30. Biorn, Erik & Klette, Tor Jakob, 1999. " The Labour Input Response to Permanent Changes in Output: An Errors-in-Variables Analysis Based on Panel Data," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(3), pages 379-404, September.
  31. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
  32. Easterly, W & Levine, R, 1996. "Africa's Growth Tragedy : Policies and Ethnic Divisions," Papers 536, Harvard - Institute for International Development.
  33. Caselli, Francesco & Esquivel, Gerardo & Lefort, Fernando, 1996. " Reopening the Convergence Debate: A New Look at Cross-Country Growth Empirics," Journal of Economic Growth, Springer, vol. 1(3), pages 363-89, September.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:edb:cedidp:13-02. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sarmistha Pal)

The email address of this maintainer does not seem to be valid anymore. Please ask Sarmistha Pal to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.