Lecture 6.1

Ethnicity and Public Goods

Emmanuel Teitelbaum

Diversity and Collective Action

Because they are non-excludable, public goods and common pool resources threatened by collective action problems (CAPs)
- Public goods = socially beneficial
- Individuals have incentives to free-ride
Tragedy of the commons
- Large-scale illustration of collective action problem
Prisoner’s dilemma
- Small-scale illustration of collective action problem

Macro-level studies find a robust negative correlation between ethnic heterogeneity and public goods provisioning
- Seminal study: Alesina, Baqir, and Easterly 1999
Micro-level studies find that shared identity promotes collective action among “coethnics,” and prevents cooperation among “non-coethnics”
What explains this relationship? What links ethnic diversity and public goods provisioning?

Ethnicity turns public goods into club goods
Collective action occurring at the level of the ethnic group, not at the level of society as a whole

Collective action is more likely with the right set of incentives
“Selective incentives” are incentives targeted at individuals to make participation advantageous and non-participation disadvantageous (Olson)
- Inducements–positive incentives
- Constraints–negative incentives
Ethnic groups may be better at devising and applying selective incentives than other groups or institutions
- Expectations of reciprocity
- Ability to sanction through informal institutions

Coordination problems are even bigger among large groups (Olson)
- “Action taking groups” tend to be much smaller than “non-action taking groups”
- Examples: committees in Congress, partners in a small company, executives, lobbyists, unions
- Versus broad classes of people (working-class; citizens; shareholders in a large company)
Why? Distribution of gains versus costs of collective action
Ethnic groups are a smaller subset of society
- Thus a more viable “action-taking” group
- Think here about public provisioning at the local (e.g. village) level

Basic problem: when ‘a’ contracts with ‘b’, how does ‘a’ know that ‘b’ will follow through?
In developing countries, governments often lack enforcement capacity
Ethnic groups help overcome deficits of government institutions
- Informational shortcuts (e.g. “I trust her because she is from my community.”)
- By compensating for reputation and trust deficits through dense social networks (e.g. “We are from the same village and people say that she is trustworthy.”)

Subnationalism: a form of group identification based on language or regional culture
Subnational identity increases support for collective welfare
State enacts social policy, promotes human development

Narrow Ethnic Parties
- Small winning coalitions
- Politics remains clientelistic
Encompassing Ethnic Parties
- Larger winning coalitions
- More social spending

Future movement vs. Hezbollah
- Future movement provides benefits across sectarian lines
- Whereas Hezbollah favors coethnics
Key reason is electoral mobilization
- Future Movement prioritizes winning elections
- Hezbollah prioritizes contentious politics (protests, demonstrations, or warfare)

So far we have talked about how structural factors condition effects of ethnicity on service provisioning.
Can governments choose to alter incentives if they want to?
Tanzania vs. Kenya
- Which country does a better job of managing ethnic diversity?
- What is the evidence of this?
How do Tanzania and Kenya approach diversity differently?
- Why is one more successful than the other?
- Are there lessons for other countries?

Source: Habyarimana et. al., 2007

Source: Habyarimana et. al., 2007

Source: Habyarimana et. al., 2007