AFRICA’S GROWTH TRAGEDY: Policies and Ethnic Divisions*

Explaining cross-country differences in growth rates requires not only an understanding of the link between growth and public policies, but also an understanding of why countries choose different public policies. This paper shows that ethnic diversity helps explain crosscountry differences in public policies, political stability, and other economic indicators. In the case of Sub-Saharan Africa, economic growth is associated with low schooling, political instability, underdeveloped financial systems, distorted foreign exchange markets, high government deficits, and insufficient infrastructure. Africa’s high ethnic fragmentation explains a significant part of most of these characteristics. * We are grateful for comments from Alberto Ades, Alberto Alesina, Reza Baqir, Robert Barro, Deepak Bhattasali, Jerry Caprio, Paul Collier, Christopher Delgado, Allan Drazen, Ibrahim Elbadawi, Ted Robert Gurr, Gerald Helleiner, Ishrat Husain, Christine Jones, Ravi Kanbur, Miguel Kiguel, Peter Montiel, Benno Ndulu, Lant Pritchett, Maurice Schiff, Andrei Shleifer, Moshe Syrquin, Duncan Thomas, Ulrich Thumm, Alwyn Young and two anonymous referees. Comments by participants in seminars at the All-UC Economic History Conference, HIID Growth Conference, Massachusetts Institute of Technology, African Economic Research Consortium in Nairobi, and Golden Jubilee Conference at University of Natal in Durban, South Africa were very valuable. Reza Baqir, Mary Hallward, and Giuseppe Iarossi provided valuable research assistance during different stages of data assembly. Views expressed here should not be taken as those of the World Bank or its member governments. Data for this paper are available at the web site http://www.worldbank.org/html/prdmg/grthweb/growth_t.htm.