On the Dynamics of Ethnic Fractionalization

Does fractionalization change over (short periods of) time? If so, are there any substantial implications for economic performance? To answer such questions, we construct a new panel data set with measures of ethnic, linguistic, and religious fractionalization for 26 former communist countries covering the period from 1989 to 2002. Our fractionalization measures show that transition economies became more ethnically homogeneous over such a short period of time, although the same did not happen for linguistic and religious diversity. In line with the most recent literature, there seems to be no effect of (exogenous) diversity on macroeconomic performance (that is, on per capita GDP growth). However, we find that dynamic (endogenous) ethnic diversity is negatively related to growth (although this is still not the case for linguistic and religious diversity). These findings are robust to different specifications, polarization measures, and instrument sets as well as to a composite index of ethnic‐linguistic‐religious fractionalization.