Ethnic Conflicts and The Information Dividend of democracy

Résumé

Why does democracy occur? Most existing explanations view democracy as an institutional arrangement that solves a class conflict between a rich elite and the rest of the population. We study the logic of democratic transition when ethnic tensions are more salient than the poor/rich divide. We provide a theoretical model where both military and political mobilizations rest on the unobserved strength of ethnic identity. By eliciting information, free and fair elections restore inter-ethnic bargaining efficiency and prevent conflict outbreak. Our setup generates new predictions on the nature of political regime, government tenure, inequality, ethnic politics and social unrest for ethnically divided countries - all consistent with country-level panel evidence on heterogeneity of inequality patterns and government duration across different types of autocratic/democratic regimes.