The Provision of Public Goods in an Economy with Ethnic Divisions∗

Many observers have argued that ethnic divisions make public goods more difficult to provide. This paper examines the provision of public goods in an economy with ethnic divisions. Households feel altruistically toward other households in their ethnic group. The amount of public goods in private contribution equilibrium is generally in decreasing in the amount of ethnic diversity. Public goods provision is inefficient using the private contribution mechanism. In certain circumstances, majority voting provides an efficient level of public goods. Ironically, majority voting acts as a planner who favors the minority. ∗I thank V.V. Chari and Larry Jones for helpful suggestions. Address: Department of Economics, Louisiana State University, 2131 CEBA, Baton Rouge, LA, 70803. email: [email protected]. Tel. (225) 578-3791.