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Ethnic Diversity, Democracy, and Corruption

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  • Mr. Etienne B Yehoue

Abstract

I study the link between ethnic diversity, democracy, and corruption. In a static model, I show that contrary to conventional wisdom, corruption might emerge as a negative externality of democracy. This occurs through ethnicity, which appears as a rent-extracting technology in a democratic society. Extending the model into a dynamic framework, I find that this technology of extraction operates only at the early stage of democracy. Its impact tends to phase out as democracy matures. In other words, the model predicts that democracy exhibits a threshold effect on corruption.

Suggested Citation

  • Mr. Etienne B Yehoue, 2007. "Ethnic Diversity, Democracy, and Corruption," IMF Working Papers 2007/218, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2007/218
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    References listed on IDEAS

    as
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    4. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 265-286.
    5. Roberto Perotti, 1993. "Political Equilibrium, Income Distribution, and Growth," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(4), pages 755-776.
    6. Armendariz de Aghion, Beatriz, 1999. "On the design of a credit agreement with peer monitoring," Journal of Development Economics, Elsevier, vol. 60(1), pages 79-104, October.
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    WP; upper bound;

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