ETHNIC BIAS AND THE DISTRIBUTION OF STATE PATRONAGE IN NATURAL RESOURCE DEPENDENT ECONOMIES

Abstract

I explore whether ethnic minorities in a sample of natural resource dependent Eastern European nations face greater bias in the distribution of state resources than minorities in diverse Eastern European economies. Much research has been published on how high ethnic diversity negatively affects public works programs, economic development, and perceptions of yourself and others around you. These works usually focused on the net change to a society as a whole with the conclusion that the entire state is worse off than it would have been without such ethnic diversity. My research is distinguished from these when it specifically examines the marginal effect that economic concentration, such as the dependence on a single natural resource, has on the economic welfare of minorities relative to the majority population. In line with the theoretical consensus I allow total welfare of the society to decrease due to the presence of high ethnic diversity but posit that the changes in welfare may be asymmetrically distributed between minorities and the majority. To test my hypothesis I divided a sample of Eastern European nations along measures of ethnic and economic concentration. I then test whether there were statistical differences between ethnic minorities in different combinations of ethnic and economic concentrations. Minorities being uniquely worse off in a concentrated economy due to limits being placed on their opportunities for social and economic advancement could act as the rationale for encouraging the speedy transition to a diverse, more opportunity-filled, economy by

equality-oriented governments and international development institutions.