Richer and more educated citizens demand better governance than poorer citizens. They participate more in the political process, are more difficult to buy off, and tend to have the financial resources to support a revolt. An autocrat who is politically insecure may therefore not invest in income-enhancing goods like education, roads, the rule of law, etc. This argument is not new. The novelty of this paper is to argue that ethnic diversity and discrimination exacerbate an autocrat’s fear of the negative effect of high income or income-enhancing investments like public education on his political survival. The combination of ethnic diversity and the fear of survival results in low economic performance in ethnically-diverse autocracies. I show that under such circumstances, the proportion of national income that the autocrat appropriates to himself is increasing in the degree of ethnic diversity. An implication is that in such ethnically-diverse societies, kleptocrats may be better off with a bigger share of a smaller national income than they are with a smaller share of a bigger national income. Previous empirical work provides some support for my theory. I discuss applications and limitations of my results.
