The Impact of Ethnic Diversity on Institutions and Economic Development in Former Yugoslavia

• Thesis title in Czech: Vliv etnické diverzity na instituce a ekonomický rozvoj v zemích bývalé Jugoslávie
• Thesis title in English: The Impact of Ethnic Diversity on Institutions and Economic Development in Former Yugoslavia
• Key words: etnická diverzita, ekonomický růst, index frakcionalizace, země bývalé Jugoslávie, instituce, ekonomický model
• English key words: ethnic diversity, economic growth, fractionalization index, ex-Yugoslavia countries, institutions, econometric model
• Academic year of topic announcement: 2017/2018
• Thesis type: Bachelor's thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: PhDr. Jiří Schwarz, Ph.D.
• Author: hidden - assigned by the advisor
• Date of registration: 24.05.2018
• Date of assignment: 07.06.2018
• Date and time of defence: 09.09.2019 09:00
• Venue of defence: Opletalova - Opletalova 26, O206, Opletalova - místn. č. 206
• Date of electronic submission: 31.07.2019
• Date of proceeded defence: 09.09.2019
• Opponents: doc. Ing. Tomáš Cahlík, CSc.

References

Institute for Statistics of FBiH (2017). Statistical Yearbook of the Federation of Bosnia and Herzegovina 2017. Sarajevo (2017). Retrieved from: http://fzs.ba/wp-content/uploads/2017/12/Godisnjak-2017.pdf

Republic Srpska Institute of Statistics (November, 2017). Statistical Yearbook of Republic Srpska 2017. Banja Luka (2017). Retrieved from: http://www2.rzs.rs.ba/static/uploads/bilteni/godisnjak/2017/StatistickiGodisnjak_2017_WEB.pdf

Croatia Bureau of Statistics (2017). Statistical Yearbook of the Republic of Croatia 2017. Zagreb (2017). Retrieved from: https://www.dzs.hr

Statistical Office of the Republic of Serbia (2017). Statistical Yearbook of the Republic of Serbia. Belgrade (2017). Retrieved from: http://publikacije.stat.gov.rs/G2017/Pdf/G20172022.pdf

Christian Bjørnskov (2012). How Does Social Trust Affect Economic Growth?. Southern Economic Journal (2012). Retrieved from: https://www.jstor.org/stable/41638856?seq=1#page_scan_tab_contents

Peter Thisted Dinesen and Kim Mannemar Sønderskov (2015). Ethnic Diversity and Social Trust: Evidence from Micro- Context. American Sociological Association (2015). Retrieved from: http://journals.sagepub.com.ezproxy.is.cuni.cz/doi/pdf/10.1177/0003122415577989

Jose Garcia- Montalvo and Marta Reynal- Querol (2005). Ethnic Diversity and Economic Development (July 2005). Journal of Development Economics 76 (2005) 293-323. Retrived from: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.719.1715&rep=rep1&type=pdf

Preliminary scope of work in English

Research question and motivation

The research question of the thesis is the impact of ethnic diversity on institutions and economic development in former Yugoslavia. Purpose of this research is to investigate an ethnically diverse region as a whole, then focus on each subject country. By doing so, by the end of the thesis, it would be possible to conclude whether ethnic diversity has a positive, negative or any impact, at all, on economic development and growth in these countries under current circumstances.
Referring to some previous papers connected to this topic, it has been found that ethnic diversity has a large negative effect on economic development, mostly through reduction in investment and increase in government consumption (Garcia- Montalvo and Reynal- Querol, 2005).
However, the past research papers, such as the one stated above, do not deal specifically with the region of former Yugoslavia, which gives us space to conduct a similar research on a relatively ethnically heterogenic region. It is also important to underline that each country and region is unique and has its own way of functioning and should therefore be analyzed within its own specific framework.
The topic is of a great importance in today’s World, where differences are becoming more and more evident and are influencing different aspects of life and development. This research should help us understand the trend on a real world example. Moreover, the research aims to indicate the real drawbacks and advantages of such a complex region. It should further, give motivation to work on improving the current situation in the region and advance its economic development.



Contribution

This thesis will be built on the existing theories and literature of the relationship between ethnic diversity, social trust and economic development. The obtained results shall be encircled into a conclusion which could contribute to understanding the relationship between economic development and ethnic diversity. The results of this research could serve as a basis for further analysis of some specific development aspects of the region such as social, particular economic sectors, etc., which would further facilitate development of the region.



Methodology

The study shall begin by description and analysis of composition of the region. The reader will be introduced to the composition of the population, its history, political background and related complexity of political institutions. The link between all of these and slow economic progress will be explained.
The region’s slower economic growth can also be connected to the recent violent war that affected majority of former Yugoslavia countries leaving behind the devastating consequences including destroyed economy and ruined relevant infrastructure. Furthermore, it completely transformed this previously socialist region, whereby new countries have been established that needed to build their economies on the ruins left by the war. Ethnic composition of the population of these countries have changed in many areas with people moving from one part of the region to another, leaving and having to start dealing with the sectors they have never been involved in. All of these negatively influenced economic growth of the region as a whole. In the aftermath of the war, not only tensions, but complex political apparatus bears a portion of slow economic growth in a particular country. This is especially visible in the case of Bosnia and Herzegovina, where due to its geographical position, situated between Croatia and Serbia, its ethnic composition is rather diverse, which makes the situation the most complex in the whole region. It is a country of three dominant constituent peoples (Bosniaks, Croats and Serbs), two entities and one district, the presidency which consists of three members and a huge and complex institutional composition. This can be clearly demonstrated by the number of ministries at different governmental levels, which is 136. This shows that the administrative structure is not only complex, but represents a heavy financial burden to the country struggling with financial difficulties. This altogether results in difficulty of any policy that is to be passed as well as a trust to be built by potential investors that could boost the economic growth.
Data, that is to be used is obtained from statistical agencies of the countries (mainly from Statistical Yearbooks, which can be found in references section, down below), as well as The world Bank and European Values Study. In the data analysis, all important influencing factors shall be examined in order to obtain valid result. This shall be done through usage of standard econometric methods (fixed effect estimator).



Outline

The thesis shall begin with the description and analysis of the region. This will introduce a reader to the history as well as the current position and situation of the region. In this part, the ethnical, political and institutional structure will be elaborated.
Data will be structured and examined by conducting certain econometric methods (such as index of fractionalization).
In further analysis, a sample of the region will be examined, followed by division of the large sample into samples of individual countries, which would provide a closer view on the relationships between ethnic diversity and economic development.
The most expected outcome is that the economic development and ethnic diversity will be negatively correlated, as it was concluded in the papers from the past (Montavlo and Reynal- Querol, 2004 and Bjørnskov 2008). However, the correlation is being created in a different region, under different circumstances, caused by different influences and resulting in different scope. The results would probably be slower economic growth and the reason for that could be the fact that the high level of ethnic diversity and complex institutional structure, burdened with difficult political situation can represent the drawback for the growth of the whole region and can prevent existing development potentials to be put into function of economic development. It is particularly evident in Bosnia and Herzegovina, the most ethnically diverse, and therefore the most complex country in the region, for which development challenges will be particularly presented and analyzed. Situation in more homogenous countries, such as Serbia, will be presented too, where it is evident that although slow, a steady progress is being achieved. Positive example of Croatia, which is also a former Yugoslavia country, but has become EU member state, will be shown, where decent level of progress has been achieved, despite the recent turbulent past.
The expected general conclusion, after investigating past relevant papers and conducing specific analysis of the topic, will probably be, that the more the country/the region is complex (ethnically and institutionally), the lower development rate is expected to be.