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Fractionalization, Rent Seeking, and Economic Freedom

Author

Listed:
  • Bonnie Wilson

    (Department of Economics, Saint Louis University)

  • Jac Heckelman

    (Department of Economics, Wake Forest University)

Abstract

Diversity is often thought to create conflict and harm economic institutions. We hypothesize, however, that the impact of diversity is conditional on political institutions, and may be negative in some settings but positive in others, due to differences in the nature of rent seeking in different regimes. To test this hypothesis, we estimate the impact of diversity on economic freedom, conditional on the level of political rights. We find that the marginal impact of ethnic, linguistic, and religious diversity on economic freedom is positive in the most democratic nations, and that the marginal impact of ethnic diversity is negative in the most autocratic nations. Our results suggest that the nature of the relation between diversity and economic institutions may be more complicated than prior literature conveys.

Suggested Citation

  • Bonnie Wilson & Jac Heckelman, 2015. "Fractionalization, Rent Seeking, and Economic Freedom," Working Papers 2015-03, Saint Louis University, Department of Economics.
    • Handle: RePEc:slu:wpaper:2015-03
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    File URL: http://www.slu-econ-wp.com/RePEc/slu/bonnie_wilson/Ef_and_EF_PC.pdf
    File Function: First version, 2015
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    More about this item

    Keywords

    fractionalization; economic freedom; special-interest groups; economic policy;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H10 - Public Economics - - Structure and Scope of Government - - - General

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