Ethnic segregation and the quality of government: the importance of regional diversity

It has recently been argued that the regional segregation of ethnic or linguistic groups leads to lower government quality and that this is partly due to the negative effect of segregation on inter-group trust. In this paper I show that the relationship between ethnic segregation, trust and government quality is mediated by another dimension of regional diversity namely, regional income disparities. Accounting for regional disparities reduces the estimated impact of segregation and trust on the quality of government and reduces the statistical robustness of ethnic segregation. The analysis highlights the usefulness of identifying other factors which may be driving regional diversity, beyond ethno-linguistic characteristics.