Ethnicity, Identity and Economic Growth: Part 1

Recently, I read with much interest an article with the intriguing title of "The Political Economy of Ethnicity" by Paul Collier in the Annual World Bank Conference on Development Economics 1998. Professor Collier is a development economist renowned for his research on development and civil war in Africa. This is the same person who wrote the well-received book titled The Bottom Billion.

In his paper, Collier (1998) highlights the well-known paper by Easterly and Levine which found that aggregate ethnic diversity significantly reduces economic growth. The authors had argued that ethnic diversity (measured via an index called ethnic fractionalization) makes it harder for policymakers to reach cooperative solutions to problems instead engaging in zero-sum games (Collier, p.388). Interestingly, diversity lowers spending on productive public services while increasing rent seeking. It also leads to inhibits the development of social capital and trust.

The type of politics associated with ethnically diverse societies is "identity politics" which emphasizes differences amongst citizens. An interesting outcome of such politics is the distribution of resources by the state via patronage to benefit party loyalist rather than the median voter. Collier and his colleagues extended this line of research by investigating the role of political institutions using econometric analysis based on cross-country data. One of their finding is that democracy (proxied by degree of political rights) can reduce problems caused by ethnic diversity. Why is this so? Collier argues that democracy provides institutions that mediates potentially costly disputes between ethnic groups.

The comments on the paper by Pauline Peters (an anthropologist) and Jennifer Widner (a political scientist) are also interesting. Amongst other, Peters argued that ethnicity in itself is never the sole basis of identity. Other factors such as religion, clan, occupation and other social status may be important. More importantly, Peters argued that ethnic differences do not cause economic decline or political violence and that what is important is to identify the conditions under which ethnic difference is associated with adversarial relations or violence. Widner also emphasized the importance of identity, noting that "ethnic identities are socially constructed, highly malleable and situationally defined". People are also deemed to have multiple identities, the strength of attachement to each depending on different situations.