Nationalism and government effectiveness

Nation-building is believed to have a positive influence on economic and political outcomes, especially in countries with ethnically fragmented populations. Yet nationalism, an indicator of successful nation-building, has been empirically linked to protectionism and intolerance, which suggests that dismal performance is a more likely outcome. This paper empirically identifies an inverted U-shaped relationship between nationalism and government effectiveness. The results suggest that the level of nationalism in the population is higher than optimal in most countries. It is further shown that nationalism may mitigate the negative effects of ethnic heterogeneity in former colonies. We find no clear linkages between nationalism and trade openness. Journal of Comparative Economics 39 (3) (2011) 431-451. Gothenburg Centre of Globalization and Development, University of Gothenburg, Sweden; University of Gothenburg, Swedish Agency for Growth Policy Analysis, Sweden. (C) 2011 Association for Comparative Economic Studies Published by Elsevier Inc. All rights reserved.