Love Your Neighbor As Yourself? Ethnic Fractionalization and Preferences for Redistribution: A Cross-Country Study

Abstract

Increases in immigration have spurred a focus on the effects of diversity in current economic empirical literature. Ethnic diversity—often quantified as “ethnic fractionalization”—may influence preferences for redistribution, a relationship studied recently in Europe and the United States. The predominant finding throughout the literature is that fractionalization correlates with distaste for the welfare state. In this thesis, I expand my scope of study to encompass more regions than have previously been analyzed. I examine the effects of ethnic fractionalization on preferences for redistribution in a cross-country sample of thousands of individuals from up to 71 countries. I use linear regressions with global data from four waves of the World Values Survey—collected in 1990-1991, 1995-1996, 1999-2001 and 2005-2007—and an index of ethnic fractionalization compiled by Alesina et al (2003) using data from 1979-2001. My results confirm diversity’s negative effect on redistributive preferences. From further explanatory regressions and previous literature on the subject, I postulate that this effect may come from negative racial stereotypes of minorities who are perceived to make up the majority of the poor in more diverse countries, as well as racial in-group bias. This leads to lower preferences for redistribution, resulting in a smaller welfare state and thus decreased chances for the poor to escape their dire economic situation.