# **7 Access to Power and Institutions**

Inequality across ethnic groups has been documented in the literature as one of the main potential sources of conflict. Besley and Persson (2011) present a theoretical framework in which fighting for control of the state is an important reason for conflict. Cederman et al. (2010) provide quantitative evidence suggesting that outbreaks of armed conflicts are the result of competing ethnonationalist claims to state power. Cederman et al. (2013) find also that disadvantaged and advantaged ethnic groups have higher propensity of entering into conflict but only where there is also political exclusion. Buhaug et al. (2014) show that countries with very poor (compared to the national average) ethnic groups and those with large discriminated groups from national politics are more likely to experience an armed conflict.

What are the sources of this inequality across ethnic groups? Burgess et al. (2015) provide an answer to this question by exploring the link between access to power, political institutions and inequality in the allocation of public investments. They show evidence for strong ethnic favoritism using variation in political leadership and data on road building in Kenyan districts across the 1963-2011 period. Most importantly, they show that this favoritism in road investments vanishes during periods of "democracy". The authors argue that in the African context where presidential power is based on ethnicity, even weak democratic institutions translate into a decrease in favoritism towards groups in power as political leaders are forced to share public goods across the wider population. Hodler and Raschky (2014) also find that sub-national regions have more intense night light when being the birth region of the current political leader and this favoritism is most prevalent in countries with weak political institutions and poorly educated citizens.<sup>45</sup> At the country level, institutions have often been linked to differences in mean economic performance. However, the fact that strong institutions keep conflict from escalating will obviously also have an impact on volatility. In this aspect our work relates to recent research that shows that growth volatility is higher for countries with weak institutional constraints. Besley and Mueller (2015b) show that countries with weak executive constraints have a chance of experiencing negative growth which is about 50 percent higher compared to countries with strong constraints. Also they are more than twice as likely to have a growth rate below -5% and are over three times more likely to experience a growth rate below -10%. The authors argue that this effect is driven by the fact that weak executive constraints increase the risk of observing a prolonged period of economic contraction. In the absence of strong executive constraints, we expect the misallocation of public goods suggested by Burgess et al. (2015) to translate into cross ethnic group inequalities. These inequalities lead to a higher risk of conflict outbreak as shown in Alesina et al. (2015) which in turn increases the risk of a prolonged period of contraction. The conflict mechanism is valid even when a country does not actually experience two-sided violence. For example, massive investments in state repression capacity by ethnic groups in power might keep the lid on

> 45 They use a panel of 38,427 sub-national regions from 126 countries with yearly observations from 1992 to 2009.

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