Can Institutions Resolve Ethnic Conflict?

31 Pages Posted: 24 Feb 2005

See all articles by William Easterly

William Easterly

New York University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: November 30, 1999

Abstract

November 2000

Ethnic diversity has a more adverse effect on economic policy and growth when a government's institutions are poor. But poor institutions have an even more adverse effect on growth and policy when ethnic diversity is high.

High-quality institutions - reflected in such factors as rule of law, bureaucratic quality, freedom from government expropriation, and freedom from government repudiation of contracts - mitigate the adverse economic effects of ethnic fractionalization identified by Easterly and Levine (1997) and others.

Ethnic diversity has a more adverse effect on economic policy and growth when a government's institutions are poor. But poor institutions have an even more adverse effect on growth and policy when ethnic diversity is high. In countries where the institutions are good enough, however, ethnic diversity does not lessen growth or worsen economic policies.

Good institutions also reduce the risk of wars and genocides that might otherwise result from ethnic fractionalization. However, these forms of violence are not the channel through which ethnic fragmentation and its interaction with institutions affect economic growth.

Ethnically diverse nations that want to endure in peace and prosperity must build good institutions.

This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to study the political economy of policymaking and institutions.

Suggested Citation

Easterly, William, Can Institutions Resolve Ethnic Conflict? (November 30, 1999). World Bank Policy Research Working Paper No. 2482. Available at SSRN: https://ssrn.com/abstract=632552 or http://dx.doi.org/10.2139/ssrn.632552

William Easterly (Contact Author)

New York University - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States

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