Recent studies of the linkages between the wealth of nations and the institutions
of governance suggest that concentrating political power in a monarchy
or a ruling coalition impedes economic growth and, moreover, that while powerdiffusing
reforms can enhance the wellbeing of society in general, opposition by
groups benefitting from the status quo is predictable. In November 2005, Kenyans
rejected a proposed constitution that, despite promises made by their new chief executive,
would not have lessened the powers of the presidency. Using a unique,
constituency-level dataset on the referendum vote, we estimate a model of the
demand for power diffusion and find that ethnic groups’ voting decisions are in-
fluenced by their expected gains and losses from constitutional change. The results
also highlights the importance of ethnic divisions in hindering the powerdiffusion
process, and thus establish a channel through which ethnic fragmentation
adversely impacts economic development.