Inequality and Fractionalization

31 Pages Posted: 28 Sep 2010

See all articles by Gregory P. Casey

Gregory P. Casey

Hamilton College - Economics Department

Ann L. Owen

Hamilton College - Economics Department

Date Written: August 31, 2010

Abstract

We present evidence that ethnic fragmentation explains variations in per capita income, institutions, and schooling better than income inequality when both are treated as endogenous. To do so, we identify instruments for ethnic fractionalization and income inequality based on historical experience. Using instrumental variables estimation, we find that ethnic fractionalization explains the level of income both when income inequality is included as a control in the estimation and when it is not. However, we find no evidence that income inequality affects the level of income when ethnic fractionalization is properly treated as an endogenous variable. We have similar findings when other development outcomes such as schooling or proxies for institutional quality are used as dependent variables. These results are robust to various controls and changes in the sample size and suggest that some of the previous findings regarding the effect of income inequality on development should be attributed to ethnic fractionalization.

Keywords: inequality, ethnic fractionalization, colonization

JEL Classification: O15, O43

Suggested Citation

Casey, Gregory P. and Owen, Ann L., Inequality and Fractionalization (August 31, 2010). Available at SSRN: https://ssrn.com/abstract=1683580 or http://dx.doi.org/10.2139/ssrn.1683580

Gregory P. Casey

Hamilton College - Economics Department ( email )

198 College Hill Road
Clinton, NY 13323
United States

Ann L. Owen (Contact Author)

Hamilton College - Economics Department ( email )

198 College Hill Road
Clinton, NY 13323
United States
315-859-4419 (Phone)
303-859-4477 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
64
Abstract Views
531
rank
352,843
PlumX Metrics