The dynamics of ethnic fragmentation: A proposal for an expanded measurement index

I Introduction THE PHENOMENON OF ETHNICITY continues to attract significant academic interest and investigation. Since the 1950s, economic development scholars have recognized the important role of noneconomic variables such as religion, political and legal institutions, and cultural factors to the economic development viability of developing countries. A major concern for development economists has been how to better determine the extent of the influence of ethnic diversity on prospects for economic development and growth in plural societies, a significant number of which are also developing countries. Adelman and Morris (1967) were among the first to attempt to empirically investigate the role of noneconomic variables in economic development. (1) North (1994) suggested that the lack of significant progress in the last five decades in the field of economic development has been due to the erroneous idea that noneconomic variables do not matter. However, this lack of progress could also have been due to the difficulty in quantifying these noneconomic variables, particularly in empirical studies. Economists have yet to develop a comprehensive empirical definition/measurement of ethnic diversity despite its significant influence on political stability and, ultimately, economic growth and development. This paper examines problems with the prevailing empirical measurement of ethnic diversity, which relies primarily on linguistic differentiation, and proposes a new measurement index. The prevailing index fails to capture the multiple forms of ethnic differentiation and thus inadequately reflects the effect of such differentiation on economic growth in specific regions. The analysis presented is from an economist's point of view; it in no way challenges the results of the existing body of empirical work in the literature based on the prevailing index. However, I contend that accurate and robust assessments of how ethnic diversity influences development patterns, or vice versa, require identification of every potential form of social differentiation. For the purposes of this paper, then, ethnic diversity is defined broadly to include all forms of social fragmentation, such as cultural, religious, racial, ethnic, and linguistic distinctions. The paper is structured as follows. Section II is a literature review outlining the relationship between ethnicity and economic development. Section III is a discussion of regional variations in the composition of ethnic diversity. These examples show that the prevailing measurement of ethnic diversity fails to account for the significance of the various social distinctions that exist. More specifically, a general or working knowledge of regional variations also illustrates that the constitutive elements of the regional compositions differ. Section IV proposes a more accurate empirical measurement index. The section also includes a discussion of the derivation of the expanded index, its advantages over the prevailing index, and a table of indices of ethnic diversity for 133 countries. Section V presents my concluding observations. II Ethnic Fractionalization/Fragmentation and Economic Development: A Literature Review THE CONCEPT OF ETHNO-LINGUISTIC FRACTIONALIZATION (ELF) was developed in 1964 by Soviet social scientists attempting to measure the ethno-linguistic diversity of the world population. Subsequently, Taylor and Hudson (1976) computed an ELF index, which has been employed as a standard measure of ethnic diversity. Loosely defined, ELF measures the probability that two randomly selected persons in a country will not belong to the same ethno-linguistic group. Mauro (1995) first introduced ELF to economics literature as a tool for measuring ethnic diversity. A significant body of empirical literature establishes that ethnically fragmented societies have uniquely significant problems in achieving economic development goals. …