Corruption, Growth and Ethnic Fractionalization: A Theoretical Model

34 Pages Posted: 8 Nov 2011

See all articles by Roy Cerqueti

Roy Cerqueti

Independent

Raffaella Coppier

Università degli Studi di Macerata - Department of Economic & Financial Institutions (DIEF)

Gustavo Piga

University of Rome

Date Written: November 8, 2011

Abstract

This paper analyzes the existing relationship between ethnic fractionalization, corruption and the growth rate of a country. We provide a simple theoretical model. We show that a nonlinear relationship between fractionalization and corruption exists: corruption is high in homogeneous or very fragmented countries, but low where fractionalization is intermediate. In fact, when ethnic diversity is intermediate, constituencies act as a check and balance device to limit ethnically-based corruption. Consequently, the relationship between fractionalization and growth rate is also non-linear: growth is high in the middle range of ethnic diversity, low in homogeneous or very fragmented countries.

Keywords: corruption, ethnic fractionalization, monitoring cost, economic growth

JEL Classification: D73, K42, O43

Suggested Citation

Cerqueti, Roy and Coppier, Raffaella and Piga, Gustavo, Corruption, Growth and Ethnic Fractionalization: A Theoretical Model (November 8, 2011). CEIS Working Paper No. 216. Available at SSRN: https://ssrn.com/abstract=1956543 or http://dx.doi.org/10.2139/ssrn.1956543

Roy Cerqueti

Independent ( email )

No Address Available

Raffaella Coppier

Università degli Studi di Macerata - Department of Economic & Financial Institutions (DIEF) ( email )

Via Crescimbeni 20
Macerata 62100
Italy

Gustavo Piga (Contact Author)

University of Rome ( email )

Via di Tor Vergata
Rome, Lazio
Italy

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