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date: 06 July 2022

Abstract and Keywords

Why are some states able to provide public goods and promote broad-based development whereas other states do not have the capacity to do any of these things? In search for an answer to this question, the past few decades have witnessed a radical increase in studies emphasizing a presumed negative role of ethnic fractionalization. Having been referred to as “one of the most powerful hypotheses in political economy,” the negative impact of ethnic fractionalization is now even so widely accepted that it has become a “standard” control in regressions explaining variation in political, social, and economic development. This chapter introduces, revisits, and confronts this so-called “diversity debit hypothesis,” focusing on the role of the Quality of Government. In particular, the chapter emphasizes the need to endogenize the relationship between ethnic fractionalization and public goods provision in a way that brings the state up front of the analysis as a social force in its own right, with the power to shape notions of “us” and “them” and, thus, development outcomes.

Keywords: ethnic fractionalization, Quality of Government, public goods provision, development, state capacity, institutions, institutional theory

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