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Using Fractionalization Indexes: deriving methodological principles for growth studies from time series evidence

By Johannes Fedderke, J.M. Luiz and R.H. J. de Kadt

Abstract

Recent cross country growth studies have found that ethnolinguistic fractionalization is an important explanatory variable of long-run growth performance. This paper highlights some limitations of cross country studies by focusing on the time series evidence for South Africa. In presenting variation over time in a number of social, political and economic dimensions, this paper adds longitudinal evidence on a range of dimensions 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. The results of this study provide important nuance to the existing body of evidence, for the use of fractionalization indices in growth studies.

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