Ethnic inclusion and economic growth

Abstract

Is ethnic social diversity relevant to cross-national variation in economic development, or is the inclusion or exclusion of said groups in political decision-making the more salient factor? We argue that deleterious policy effects resulting in diminished economic growth are caused by exclusion of mobilized ethnic groups from the policy process and not just ethnic social diversity per se. Conversely, a positive impact of ethnicity as more groups are included in the policy process with increasing access to cabinet is due, first, to the fact that a population finding its preferences represented in the policy process likely supports implementation of resultant policy. Second, the policy quality likely improves with greater variety in input. Third, a greater number of included ethnic groups in cabinet increases the number of ethnic partisan veto players in the policy process — thereby generating increased policy stability in the long term. We test this idea first on long-run growth in democracy and, second, on annual indicators of growth. We find that increasing ethnic social fragmentation still negatively impacts on the economy. However, cabinet diversity offsets some of these negative effects as it improves growth of GDP per capita.