Spatial and Ethnic Inequalities and Development: Country Experiences (Draft)

In contrast to between-country comparisons, very little systematic analysis has focused on spatial or regional socioeconomic inequalities within countries; therefore the determinants of these inequalities are insufficiently understood. Similarly, socioeconomic inequalities between different ethnic groups or "horizontal inequalities" appear to be largely neglected in the economic literature on poverty reduction and inequality, which instead has predominantly focused on inequality between individuals ("vertical inequality"). Moreover, due to the methodological individualism of economic theory and analysis, economists have contributed relatively little to enhancing our understanding of why horizontal inequalities emerge and are often so persistent. In recent years, however, the importance of spatial and ethnic inequalities has been increasingly recognized, and more research has been conducted on the subject.

There are a number of reasons why spatial and ethnic inequalities in economic activity, incomes and social indicators matter both from an economic and a political perspective. First, between-group inequalities (either between regions or ethnic groups) form an important part of the overall inequality in a country. Second, regional socioeconomic inequalities in large countries such as China, India and Russia, as well as most other developing and transition economies appear to be on the rise. Third, an increasing amount of research has shown that socioeconomic inequalities between different ethnic groups (i.e., horizontal inequalities) can lead to a wide variety of political disturbances, including violent conflict and civil war; especially where these socioeconomic inequalities are complemented by political inequalities and inequalities in cultural recognition.

The objective of this paper is to analyze and compare the evolution of the socioeconomic inequalities between different regions and ethnic groups around the world. Subnational data on ethnic inequalities and on inequalities across non-traditional dimensions, such as employment, are extremely hard to find. The paper provides a theoretical review of the main issues in spatial and ethnic inequalities. It then looks at regional overviews of the dynamics of spatial inequalities in GDP per capita, for which data is relatively plentiful. This is followed by a series of detailed case studies--Ghana, Côte d'Ivoire, Malaysia, Brazil and Indonesia--across multiple dimensions of inequality.