Fractionalization, Rent Seeking, and Economic Freedom

18 Pages Posted: 3 Jun 2015

See all articles by Jac C. Heckelman

Jac C. Heckelman

Wake Forest University - Department of Economics

Bonnie Wilson

Saint Louis University - Department of Economics

Date Written: February 2015

Abstract

Diversity is often thought to create conflict and harm economic institutions. We hypothesize, however, that the impact of diversity is conditional on political institutions, and may be negative in some settings but positive in others, due to differences in the nature of rent seeking in different regimes. To test this hypothesis, we estimate the impact of diversity on economic freedom, conditional on the level of political rights. We find that the marginal impact of ethnic, linguistic, and religious diversity on economic freedom is positive in the most democratic nations, and that the marginal impact of ethnic diversity is negative in the most autocratic nations. Our results suggest that the nature of the relation between diversity and economic institutions may be more complicated than prior literature conveys.

Keywords: fractionalization, economic freedom, special-interest groups, economic policy

JEL Classification: D72, H10

Suggested Citation

Heckelman, Jac C. and Wilson, Bonnie, Fractionalization, Rent Seeking, and Economic Freedom (February 2015). Available at SSRN: https://ssrn.com/abstract=2613506 or http://dx.doi.org/10.2139/ssrn.2613506

Jac C. Heckelman

Wake Forest University - Department of Economics ( email )

P.O. Box 7505
Winston-Salem, NC 27109
United States
(336) 758-5923 (Phone)
(336) 758-6028 (Fax)

HOME PAGE: http://www.wfu.edu/~heckeljc/jac.htm

Bonnie Wilson (Contact Author)

Saint Louis University - Department of Economics ( email )

3674 Lindell Boulevard
Saint Louis, MO 63108
United States

HOME PAGE: http://https://sites.google.com/a/slu.edu/bonnie_wilson/

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