the effects of group membership more generally. Does belonging to a church
have any extra or different advantages from belonging to a bowling club (see
below in this chapter for discussion of networks)?
Ethnicity
There are various influential works arguing that cultural diversity has been bad
for economic growth. While public policies of course influence growth, this
debate suggests that ethnic differences help explain policy choice, so culture
becomes a deep determinant of economic growth. More polarized societies,
they argue, are less able to agree on the provision of publicly provided goods
and services such as roads, schools and power supply. Ethnic interest groups are
likely to value only the benefits of such goods and services that accrue to their
own group and discount the benefits for other groups. Different ethnic groups
may have different priorities for the provision of public goods and services; for
example poorer groups preferring welfare and richer groups universities.
Ethnic divisions and poor policy-making
Ethnolinguistic fractionalization (ELF) is defined and measured as ‘the proba-
bility a randomly selected individual(s) belong to a different ethnic or linguis-
tic group’. ELF is correlated with various measures of poor policy, such as
black-market premiums on foreign exchange, low provision of infrastructure,
low levels of basic education and poor financial development (Easterly and
Levine, 1997). Although there are many ethnically diverse countries in Africa
(Côte d’Ivoire,Nigeria, Ghana, Congo, etc.) the finding also holds for a sample
of non-African countries. There are lots of supporting studies. The provision of
certain goods such as education, roads and sewers declines with more ethnic
fragmentation in US cities. Voters choose lower public goods when a signifi-
cant fraction of tax revenues will be used to provide public goods shared with
other ethnic groups (Alesina et al., 1999). Ethnic diversity is correlated with
the poor quality of government services in developing countries (Mauro,
1995). There is lower public support for higher education in US states with
more religious and ethnic heterogeneity (Goldin and Katz, 1999). Primary
school funding is lower in more ethnically diverse districts in Kenya (Miguel,
2000). Linguistic or religious diversity leads to greater political instability
(Mauro, 1995; Annett, 1999). Ethnically diverse countries in Sub-Saharan
African were more likely to be closed to trade and had lower levels of institu-
tional quality (Sachs and Warner, 1997). Ethnically polarized nations reacted
more adversely to external terms of trade shocks (Rodrik, 1999).
Any impact of cultural diversity on economic growth is influenced by the
relative size of ethnic groups in a complicated way. Evidence shows that as the
size of a particular ethnic group approaches 50 per cent, political protest tends
to become more violent. A possible interpretation is that as the largest ethnic
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