Why Does Ethnic Diversity Affect Public Good Provision? An Empirical Analysis of Water Provision in Africa by Ken Jackson :: NEUDC 2007 Papers :: Northeast Universities Development Consortium Conference :: Center for International Development at Harvard

The lack of provision of basic services such as piped drinking water is a major barrier to economic development in many countries around the world. However there is little consensus about the mechanisms that limit the ability of communities to provide these goods. In this paper I investigate the role of ethnic diversity as a potential barrier to the provision of public goods. The existing literature focuses on two primary mechanisms through which local ethnic diversity reduces the supply of publicly provided goods either ethnic groups have diverse preferences or the local institutions that manage inter-ethnic relations are weak. The similarity in the aggregate predictions of the two theories stands in stark contrast to the differences between their policy implications thus providing the motivation to differentiate their effects. In this paper I embed both mechanisms within a single theoretical model and derive empirical implications. I then test the implications of the model for the effects of ethnic diversity on piped water provision in Sub-Saharan Africa. With a series of household surveys covering 15 countries I am able to test theoretical predictions at both aggregate and household levels. The results indicate that ethnic diversity has signficant negative effects on the provision of piped water and ineffective local institutions are the primary channel for this effect. ∗I would like to thank participants in the UBC development and empirical lunch seminars for their helpful advice. In particular Chris Bidner, Chris Barrington-Leigh, Mukesh Eswaran, Patrick Francois and Nathan Nunn have provided numerous valuable comments and ongoing support. This paper is work in progress so any comments would be very much appreciated. †E-mail [email protected], Website grad.econ.ubc.ca/kjackson