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In their survey of the literature on ethnic fractionalization and economic performance, Alesina and La Ferrara (JEL 2005) identify two main directions for future research. One is to improve the measurement of diversity and the other to treat diversity as an endogenous variable. This paper tries to address these two issues. The authors study the effects of ethnic fractionalization on economic growth using unique time-varying measures across countries, for 26 transition economies from 1989 to 2007. The main conclusion is that they can replicate the most recent results from the literature and show that static (exogenous) diversity is not robustly related to growth.
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