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The Causal Effects of Ethnic Diversity: An Instrumental Variables Approach

Report
Authors Pelle Ahlerup
Publisher University of Gothenburg
Place of publication Göteborg
Publication year 2009
Published at Department of Economics
Language en
Links hdl.handle.net/2077/21201
Keywords economic development, ethnic diversity, instrumental variables, property rights
Subject categories Economics

Abstract

Ethnic diversity is endogenous to economic development in the long run. Yet the standard approach in economic research is to treat ethnic diversity as an exogenous factor. By identifying instruments for ethnic diversity, we correct this misspeci ca- tion and establish that ethnic diversity has an exogenous in uence on income levels, economic growth, corruption, and provision of public goods. Earlier results based on OLS estimations may have underestimated the negative e¤ects of high levels of ethnic diversity.

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