Bank (2010), p. 3) This point brings us to one of the core issues of this report. Politics is at the heart of stable peace and recovery.

# **8.3.3 Political Exclusion**

We find both at the country and ethnic group levels that the share of excluded population as measured by the GROWup can predict conflict. Other recent studies support the idea that political exclusion has real effects on the distribution of resources, i.e. it could be part of a latent conflict within countries. Exclusion implies huge risks as it amplifies economic imbalances and could in this way increase the willingness to engage in violence. In the GROWup data we find that countries which exclude more than 20 percent of their population from power are markedly more likely to experience violence and destabilization. This is particularly interesting as it fits perfectly to the observation made by Rodrik (1999) more than a decade ago: sudden economic reversals can be explained by how societies deal with internal conflict.

Strikingly, political exclusion is also a key variable in a recent literature in political science that tries to forecast conflict out of sample. Goldstone et al. (2010), for example, come up with a list of risk factors which predict the risk of conflict onset when comparing two countries on the same sub-continent. The list includes state-led discrimination. A more recent project, the International Crisis Early Warning System (ICEWS), provides a 3 month prediction of the incidence of events like rebellions, ethnic conflict and insurgencies. Again, the structural variables identified in this forecasting exercise include the number of excluded groups and the share of excluded population.

But can this mechanism be actually addressed by policy? A lot of research has gone into showing that institutions are essential ingredients for economic development generally and the results in this report also indicate that they might be key mediating factors. However, in a post-conflict setting changes in formal institutions might not appear possible or even risky.<sup>57</sup> It might then still be possible to introduce informal institutions. Blattman et al. (2014) study the role of new institutions in support of the formal ones in the development of Liberia. They argue that the promotion of “Alternative Dispute Resolution” institutions for the protection of property rights inhibits local violence.

The codebook published for the EPR data reveals how these variables are coded.<sup>58</sup> All politically relevant ethnic groups were categorized according to the degree of access to central state power by those who claimed to represent them. State power refers to executive power only, disregarding access to legislative and judicial institutions. Depending on where political power is effectively exercised, this can be the presidency, the cabinet, and senior posts in the administration in democratic regimes; the army command in military dictatorships; or the ruling party leadership in one-party states. The three categories included in excluded groups are

> _• powerless_ : Elite representatives hold no political power (or do not have influence

> 57Flores and Nooruddin (2009), for example, argue that post conflict democratizations hinder growth because they reduce commitment power.

> 58See codebook for Vogt et al. (2015).

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