Social Fractionalization Endogenous Appropriation Norms And Economic Development

We investigate how social composition affects competitive and cooperative behavior in a linear growth model without secure property rights. If a society is homogeneous or highly fractionalized, it is in the self-interest of people to cooperate. The first-best allocation is enforced through trigger strategies, and growth is independent from social structure. If a society is polarized, i.e. if it consists of a small number of groups, the first-best solution can turn out to be unenforceable and groups will follow an exploitative strategy. In this case, the rate of growth is monotonously decreasing in the degree of fractionalization.