The Economics of Social Conflict

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This project examines the connections between economic development, the distribution of income and assets, and the emergence (or persistence) of social conflict across ethnic, geographical or economic groups. The research is informed by two basic stylized facts that characterize internal conflict in developing societies. First, economics matters. Conflicts have strong associations with economic variables such as per-capita income and natural resource revenues. Second, classical "class conflicts" --- or conflict demarcated along economic lines --- are rare: warring groups are often delineated by noneconomic markers such as ethnicity, caste, geography or religion.This project takes these facts as points of departure. A central question concerns the coexistence of economic motives and noneconomic group markers. Noneconomic markers can be used to exclude certain groups from economic progress. Indeed, the more (economically) similar the warring groups, the more such a strategy is likely to be used. Accordingly, the first part of this project constructs a theory of "group formation" in conflict, the idea being that existing social markers (such as religion) can be used to create "insiders" and "outsiders" in a variety of ways. In a world in which all sorts of sidepayments can costlessly be made, each potential conflict can, in principle, because all conflict destroys resources. However, with a multiplicity of ethnic markers, any one of which may be invoked, it may be impossible to deal with every potential threat at the same historical moment of time. It will be argued that postwar institutions, such as progressive taxation or land reform, have evolved well to deal with the specter of class conflict, but have left the door open for threats from other noneconomic markers.The second part of the project applies these ideas to an empirical study of Hindu-Muslim violence in India. If one side is socially and politically more able to use violence for economic ends, then an increase in the victim group's income should have a positive impact on conflict, while an increase in the aggressor group's income should have an insignificant effect. This sort of prediction can be tested, and the project proposes to do so. Using National Sample survey data along with a unique dataset on Hindu-Muslim conflict, preliminary results indicate that Muslim incomes are positively associated with future conflict, while Hindu incomes have no such effect. The project will build on this foundation by using additional data sources and running several different robustness checks.The third part of the project develops a theoretical model, and establishes a structural connection between conflict and well-known indices of social distribution such as inequality, fractionalization and polarization. It is shown that three particular indices determine conflict, and the relative weights on them reveal the underlying values of structural parameters in the economy.The PI also plans a full-length book manuscript on the Economics of Social Conflict. Certainly, the results from this project will form an important part of the book, but the intention is to put together, in a cohesive way, a large literature from economics, political science and sociology on the topic of conflict in developing countries.Broader Impacts: this project uses economic theory to develop testable predictions that reach beyond economic boundaries. For instance, the predicted juxtaposition of noneconomic group markers with the possibility of economic gains from conflict is a central theme. Likewise, the second part of this project, which discerns aggressor identity from economic data, exemplifies the attempt to go beyond economic boundaries. IPolitical scientists, sociologists and ethnographers will find this useful and complementary to their own work. The theory in part 3 generates a estimable relationship between conflict and various distributional indicators which will inform future empirical research in the area.Finally, from a broader social and economic perspective, the questions asked under this project are of first-order importance. Does economic growth stifle conflict, or might it exacerbate it? What is the relationship between inequality and conflict? Why might class conflict give way to ethnic conflict? Does ethnic conflict stem from some primordial hatred and mistrust, or is it carefully engineered? If so, how precisely might one write down a theory of conflict that does not presume that participants are plain irrational? While the project is firmly grounded in the logic of economic reasoning, these questions go beyond economics.