Working Paper: CEPR ID: DP6360
Authors: Nauro F. Campos; Vitaliy Kuzeyev
Abstract: Does fractionalization change over (short periods of) time? If so, are there any substantial implications for economic performance? To answer such questions, we construct a new panel data set with measures of fractionalization for 26 former communist countries covering the period from 1989 to 2002. Our fractionalization measures show that transition economies became more ethnically homogenous over such a short period of time, although the same did not happen in terms of linguistic and religious fractionalization. In line with the most recent literature, there seems to be no effect of (exogenous) fractionalization on macroeconomic performance (that is, on per capita GDP growth). However, we find that dynamic ethnic fractionalization is negatively related to growth (although this is still not the case for linguistic and religious fractionalization). These findings are robust to different specifications, polarization measures, instrument sets as well as to a composite index of ethnic-linguistic-religious fractionalization.
Keywords: ethnic fractionalization; growth; polarization; transition economies
JEL Codes: H1; O11; O55; Z12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| dynamic ethnic fractionalization (J15) | economic growth (O49) |
| initial income levels (D31) | economic growth (O49) |
| political instability (O17) | economic growth (O49) |
| ethnic fractionalization (J15) | economic growth (O49) |