ABSTRACT How does the level of democracy in a country affect the government's treatment of ethnic minorities? I use the Baron–Ferejohn game to model bargaining over government formation and resource division in an ethnically fragmented society. Each ethnic group is a unitary actor, voting weights correspond to ethnic group sizes, and recognition probabilities are proportional to voting weights. The voting quota required to pass a decision is a proxy for the level of democracy. When the majority group exceeds half of the population, the expected payoffs of minorities non‐monotonically depend on the voting quota. When the voting quota is small, several minorities may form a winning coalition, so minorities get high expected payoffs. This outcome explains the existence of relatively tolerant autocracies. For intermediate values, a coalition of minorities is insufficient to rule while the majority is sufficient. As a result, it gets most of the surplus, which reflects democracies where minorities are underrepresented in the government and get fewer benefits. Finally, when the voting quota is large, minorities are needed to form a winning coalition, so their expected payoffs are high, too. The latter scenario corresponds to democracies with many constraints on the leader, who needs the support of minorities to get approval from various branches of power.