Fractionalization and Long–Run Economic Growth: South Africa as a Time Series Case Study

Recent cross sectional growth studies have found that ethnolinguistic fractionalization is an important explanatory variable of long-run growth performance. In presenting variation over time in a number of social, political and economic dimensions, this paper adds longitudinal evidence on a range of variables that have been linked to long run economic development. Given South Africa’s history of ethnic and racial politics, it constitutes a useful case study to explore the dynamics of the possible effects of ethnolinguistic fractionalization on growth. We introduce three new sets of fractionalization indicators for South Africa and one set of political indicators. This paper highlights some limitations of earlier evidence by focusing on time series evidence for South Africa. The results of this study provide important nuance to the existing body of evidence. We find that fractionalization is subject to strong change over time. In addition, we find strong evidence of webs of association between the various social, political and institutional dimensions. Thus various forms of social cleavage tend to go hand in hand. One implication is the danger of spurious inference of association – particularly where cognizance is taken of the univariate time series characteristics of the data. Further, the direction of association in the preponderance of cases runs from economic to social, political and institutional variables, rather than the other way around. However, there remain significant impacts from some, but only some fractionalization indexes on economic growth. We infer from the evidence that it is distributional conflict that impacts on economic growth – though distributional conflict may be patterned along particular social cleavages. Which social cleavage, when, how and for what period of time will depend on the historical path of specific societies. JEL: O4, O11, Z13.