Ethnic diversity has a more adverse effect on economic policy and growth when a government's institutions are poor. But poor institutions have an even more adverse effect on growth and policy when ethnic diversity is high

High-quality institutions-reflected in such factors as rule of law, bureaucratic quality, freedom from government expropriation, and freedom from government repudiation of contracts-mitigate the adverse economic effects of ethnic fractionalization identified by Easterly and Levine (1997) and...