Ethnic Proximity and Politics: Evidence from Colonial Resettlement in Malaysia

This paper studies the long-run effects of a colonial-era, large-scale resettlement program of ethnic minorities, on contemporary economic outcomes and political preferences of ethnic majority individuals in receiving areas. In ethnic Malay-majority Malaysia, the colonial British relocated 500,000 rural ethnic Chinese minorities into fenced-up, isolated, monoethnic camps (1948 – 1960) all across rural Malaysia. This brought some pre-existing ethnic Malay-majority areas into closer contact with ethnic Chinese minorities but not others. Criteria for resettlement locations were largely military in nature. Using a spatial randomization inference-type approach, we construct counterfactual village locations based on this criteria. We find that areas located immediately next to Chinese New Villages (0-2km) experienced better economic outcomes and, in turn, had lower vote shares for the ethno-nationalistic coalition, than polling districts located next to similarly suitable, counterfactual locations. We provide suggestive evidence that these lower vote shares were driven by all voters, not just the ethnic Chinese. Together, our results suggest that persistent differences in inter-ethnic proximity can have a lasting, negative impact on voter preferences for ethno-nationalistic politics through improvements in economic outcomes and sustained increases in casual, interethnic interactions.