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Taking care of your own

Working Paper 2006-48

Abstract

Using recently developed indices of fractionalization and polarization, we analyze the direct and indirect effects of ethnic and religious heterogeneity on income inequality and on welfare programs across US states. We find strong evidence (1) that there is a positive relationship between ethnic and religious polarization and income inequality and an inverse-U shaped relationship between ethnic and religious fractionalization and income inequality; and (2) that there is a negative relationship between ethnic and religious polarization and monthly welfare payments under the AFDC/TANF scheme, and a U-shaped relationship between ethnic and religious fractionalization and the AFDC/TANF payments.

Authors: Oguzhan C. Dincer, Peter J. Lambert.

Keywords: Ethnic and Religious Heterogeneity, Income Inequality
JEL: D31, J15, O15