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Political scientists have long believed that ethnic diversity and strongly-held national identities work against the cause of democratic consolidation, yet new evidence reveals that this need not be so, and even suggests that these factors can, under certain conditions, work in its favor. And while there is evidence that ethnic diversity correlates with poor government performance, lower rates of aggregate economic growth, and ineffective provision of public goods, these relationships are subject to qualification. A diverse set of cases suggest that institutional choices are a crucial factor in determining whether ethnic diversity and national identity work for or against democratic consolidation. In the case of three unambiguously successful postcommunist democracies—Estonia, Latvia, and Lithuania—ethnic nationalism was crucial in the transition to free self-government.