Seminar 5

I. Ethnic inequality

1. Discuss reasons why and how ethnic division and inequality between ethnic group may affect economic performance
2. Explain how Alesina et al. (2015) compute their measure of ethnic inequality. Discuss pros and cons of this approach
3. What are their main findings of the effects of ethnic inequality? Discuss the thrustworthiness of the findings

II. Natural resources and development

1. Consider the theoretical model considered by Mehlum et al. (2006). Explain the role of their parameter λ, and discuss whether this captures “good institutions” in a good way.
2. Explain how they model the productive sector and why the productive sector becomes more profitable the more entrepreneurs are in the productive sector.
3. Explain how good development depends on the interplay between the amount of resources R and institutional quality λ.
4. Explain first how Mehlum et al. test their theory empirically. Discuss:
   1. Whether it is a proper test of the predictions of their model
   2. The empirical validity of their approach more generally.
   3. How their analysis could be improved upon
5. Discuss how we empirically can distinguish between resource curses induced by Dutch disease and bad politics/rent seeking.