Ethnic diversity has a more adverse effect on economic policy and growth when a government's institutions are poor. But poor institutions have an even more adverse effect on growth and policy when ethnic diversity is high

The Schelling model of a "tipping point" in racial segregation, in which whites flee a neighborhood once a threshold of nonwhites is reached, is a canonical model of strategic interdependence. The idea of "tipping" explaining segregation is widely accepted in the academic literature and popular...