Dynamic Ethnic Fractionalization and Economic Growth in Transition Economies between 1989 and 2007

        with Ahmad Saleh and Vitaliy Kuzeyev

        Published in the Journal of International Trade and Economic Development 20: 2, 129 152 (2001)     [ PDF ]

        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. First, we 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 econometric estimators, specifications, polarization measures, as well
        as to the use of an index of ethnic-religious-linguistic fractionalization.

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         Data constructed for this paper is available here

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