1. Reforms and ethnic diversity’s impact on economic growth Monica Vlaicu Laura Ionescu

2. Background Liberalizations/ Reforms taken in isolation: 1)No robust effect of becoming a democracy on economic growth (Przeworski &Liamongi 2000,); (Giavazzi & Tabellini, 2005); (Barro, 1996); 2)Economic liberalizations speed up growth by about 1% (Giavazzi & Tabellini, 2005); (Wacziarg and Welch, 2003);

3. Giavazzi and Tabellini (2005) The sequence of reforms is important to economic outcomes The Model: y it = a i +b t + y * x it + δ * reform it + e it y it → real GDP per capita growth a & b → country and year fixed effects, respectively x it → vector of other control variables (year fixed effects, continent, socialist legal origin …) reform it → 1, years after reform 0, otherwise (before reform/ control countries) e → unobserved error term δ → measures the effect of the reform on the variable Y

4. Alesina and La Ferrara (2004) Ethnic diversity has an impact on economic performances Two measures of ethnic diversity: polarization and fractionalization Both are found to have a negative impact on growth, stronger in the case of polarization

5. Our approach Drawing on the findings of these papers we test the hypothesis that not only is the sequence of liberalizations important(economic- political or vice versa), but the ethnic component affects the outcomes of reforms and thus impacts growth. We expect to find that a) Democratization + ethnic polarization → increase instability → negative impact on growth b) Liberalization + ethnic polarization → reduce instability → positive/ smaller negative impact on growth

6. DATA: Polity IV database → Polity2 indicator Penn World table 6.3 → GDP per capita growth Wacziarg and Welch (2008) → liberalization data We updated the data used by Giavazzi&Tabellini up to 2007 for democratization and economic performance and 2001 for liberalization Sample of X countries 22: democratization + liberalization 15: liberalization + democratization