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Abu Bakkar Siddique
''Does ethnic diversity hurt fiscal sustainability?''
( 2021, Vol. 41 No.2 )
This paper suggests that ethnically heterogeneous societies are collectively careless about fiscal sustainability. It provides fresh evidence about the impact of ethnic diversity on fiscal governance, specifically on public spending, revenue, and debt. The findings based on a two-way fixed effect (FE) estimation for a balanced panel dataset suggest that rising ethnic diversity in the U.S. generates higher public debt per capita and fiscal indiscipline, which are mainly driven by lower contributions to public revenue while maintaining enduring public spending. Ethnically fragmented states also receive smaller intergovernmental revenue which also hurts fiscal balances.
Keywords: Ethnic diversity, fiscal disciplines, public debt, public revenue, public expenditure, intergovernmental transfers
JEL: H5 - National Government Expenditures and Related Policies National Government Expenditures and Related Policies: General
H3 - Fiscal Policies and Behavior of Economic Agents: General
Manuscript Received : Nov 05 2020 Manuscript Accepted : Apr 09 2021

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