by Sugata Ghosh, Brunel University and Anirban Mitra, University of Kent. Discussion paper KDPE 1907, June 2019.
Non-technical summary:
Discrimination against minorities – ethnic, religious, linguistic, etc. – is a serious concern worldwide. Such systematic exclusion of segments of the population is damaging not only from a normative perspective – there are potential economic inefficiencies arising out of this. The role of political institutions in determining various economic outcomes has received much attention in the recent years. Typically, democracies are perceived to be superior to non-democracies on many dimensions; particularly, on the allocation of public spending (see e.g., Tavares and Wacziarg (2001), Deacon (2009), Acemoglu et al. (2014)).
So can the issue of discrimination against minorities be mitigated by superior institutional structures like democracy? In other words, is discrimination necessarily lower under democracies as opposed to dictatorships? Can one pin down which factors might condition the degree of discrimination under different political regimes? In particular, how does the presence of a dominant ethnic group affect discrimination under various political regimes? In this paper, we put forward a tractable theory to answer such questions.
We analyse the above questions within the context of the framework introduced in Acemoglu and Robinson (2006). In our model, political leaders (democratically elected or not) decide on the allocation of spending on different types of public goods: a general public good and an ethnically-targetable public good which benefits the majority ethnic group while imposing a cost on the other minorities. They also decide on the tax rate on incomes which provides the budget for the provision of these goods. The society consist of individuals with different ethnic identities and varying levels of income.
We show that, under democracy, lower ethnic dominance leads to greater provision of the general public good while higher dominance implies higher provision of the ethnically targetable good. Interestingly, the opposite relation obtains under dictatorship. This implies that political regime changes can favour or disfavour minorities based on the ambient level of ethnic dominance.
In our setup, the extent of appropriation of the tax revenues is an endogenous choice variable for the dictator. This allows us to document the relationship between ethnic dominance and this level of appropriation by the dictator. Our results provide a rationale – based on the size of the dominant ethnic group – for why one observes a different pattern of discrimination and not just a different level of public spending in dictatorships as opposed to democracies.
Our theory can be used to interpret certain historical events like the changing nature of Hutu-Tutsi relations in Rwanda, the treatment of Chinese Indonesians during and after the Suharto regime and more recently the issue of persecution of the Rohingya community in Myanmar. Each of these scenarios when viewed through the lens of our model appear to be consistent with the model’s predictions.
You can download the complete paper here.