eva, Gov. 001) 2: 85-99 Economics of Governance Springer Verog 2001 Social identity, inequality and conflict” James A. Robinson Deparment of Poca Science, Univesity of Calfoma a Berkely, 210 Barows Hall, Berke. C4 94720, USA (esa jamesar@ secre berkele.eds) Received June, 1993 / Aecepiod: November 22, 1959 Abstract. [extend the standard materialist rational choice model of contlict to ‘consider groups. In particular, [consider how the aggregate amount of conflict in society depends on which groups form and oppose each other. The study is mo= tivated by empitieal findings about the relationship hetween inequality, conflict and economic development. [focus on a sélient comparison: ethnie groups vs. social classes. I show that, contrary to the conventional wisdom, class conflict is ‘not necessarily worse than ethnic conflict. In fact, ethnic conflict is general worse when the distribution of income is more equal, I also investigate the impact of the fact that while ethnicity is immutable, since there is social mobility, class is not. I show that the direct impact of mobility of eonflict is as conventionally believed, but that there are important indirect effects which make the net effect ambiguous, Key words: groups, social mobility, cleavages, conflict JEL Classification: D74, 162, 01 “Recent [African] history suggests that the major patterns of conflict cohere around two organizing principles: class and ethnicity. Both are shaped and defined in important ways by the state, which serves as the primary arena for social encounter and collective conflict, Thus an inquest into contemporary and prospective sucial conflict requires an examination of the spheres of state, class and ethnicity.” ~ Crawford Young (1982) “Tam gael to ap atonynous refers, fan-Marie Balun, Amita Glazer, Murat Somer end ‘Thiesy Verdier for thelr comments ad suggestions. This paper was writen while waking DELTA in Pris aa {oud like wo tank the faculy for ther arm ad geneous hospitality aa che CNRS. for incl oppoca BA, Robins 1. Introduction Economists and political scientists have recently begun to study Formally how conflict and the possibility of conflict affects resource allocation and economic performance.’ For example, an extensive empirical literature suggests that conflict and political instability adversely affects economic development and that bigher inequality causes poor economic performance by inducing inereased conflict? In this paper | argue that a serious flaw in this research has taken too individu c 4 view of conflic.® While the approach of methodological individualism 's atactive, in reality individuals act not purely in isolation, but also as part Of larger social groupings and networks. I therefore try to consider how these models of conflict may be extended to this type of situation and thus attempt t© place individuals within a Targer social setting to see how chis alters our intuitions about conflict and its economic and political determinants and implications. [But what groups are selevant? Individuals belong (© many overlapping and cross culting groups in society. While traditional Marxist analysis stressed class groupings so that workers associated with workers and capitalists with capitalists, ‘more recent literature (see Wright, 1985) has stressed the diversity of social groupings. Rather than associate along class lines one might associate along gender. religious, or perhaps ethnic lines. Many strands of research have shovr hhow thinking of groups in this heterogeneous way can illuminate both economic tnd political behavior. ‘To make progress in this paper I think of individuals as belonging to one of wo groups. Firstly, individuals come from one of two ethnic groups to which they are exogenotsly allocated. Secondly, my model is the reduced form of & standard economic one where some individuals own the means of production ((echnology) and receive the residual income (For the sake of familiarity I shall call these agents capitalists, though actually there will be no capital accumula tion in the model), while others do not and supply only labor (workers). Thus individuals can also differ along lines of social class, An important difference alist Tape Formal erature on confit hax deceoped sine the seminal wor of Huan 1954), Roener (985, Brito and Inulligator (19883, Grxsman (1981), Shaped (1992), Grsstan and Kim 1985), Accmoghy and Robinson (2000s) and Hsia and Ry (1999 endogsned the decision to engage in conict with an am to exroprating the westpoltical power of ett agecs. They Stati the eur depres of cont and ks determinant ad implications, the ade of bower Production at expeprtion, andthe conditions under which mci sllecatios muy acuta ‘ther ele ine see Baro ad Sali Matin (1995) ors general ecw of tex enptia indigs. Alesina and Rodik (1994) and Peison snd Tallin: (1984) frat sed that neat leads wo howe scomoris owt and Alesina an Perot (1996) augue da he caves channel works va pial insaity nd comic. the eraure hasbeen ver individualistic in dhe sense hat tos conde modes whee oly individ alloate ine ad ex resources to eon Interesting comparative rests than sm fom dierent ssumptogs aut the disnbation of various sharers, ov example ince actos indivicnae “For example, Roemer (1998) intedaces religions ahiaion int voting moe and shows ow this aes the stander rests about che relatonsp between inequality nd the exe ef ice redistribution, Friedn (1991 shows bow the confasting pects 0 las and Sosa afision ea be postr tol in piel economy.Social identity, inequity andl const Ps between these two types of groups is that, ia the terminology of poli cence and sociology, class is a horizontal cleavage, while ethnicity is a vertical cleavage (there will be both workers and capitalists in both ethnic groups). Tam. paiticularly interested in which type of cleavage generates more conflict in equi Tibrium and how the comparative statics (for example, with respect to inequality) of contlict differ depending on the form cleavages take® Ip contast 19 most of the conflict literature T also place confict in a political context (as suggested by the quote ftom Young at the start of the paper). Thus in my model conllict is not modelled as if it were erime, but is rather conflict ever who has political power. (One key intuition about the why ethnic coniliet may be qualitatively distinct from class conifict stems (rom the idea that, while ethnic identity is immutable (or ‘ascriptive"), class is not, since there is social mobility between capitalists and workers. For example, Dalwendorf (1959, p.60) argues “the weight and ¥y of manifest group interests within the individual personality decrease as social mobility and the openness of conflict groups increase. The easier itis, for the individual to leave his conflict group, the less likely is he to engage his, whole personality in group conflict.” Later (p. 191), Duhrendorf postulates “an inverse relation between the degree of openness of classes and the intensity of lass conflic.” Horowitz (1985, p.90) notes “The Marxian Prophecy of class conflict in Western industrial society was.undermined by the inaccuracy of this characterization of class afiiations..Social mobility, both within single lifetimes and across generations, mitigates the ascriptive character of class alfiliations,” This is the main distinction drawn between ethnic groups and classes in the sociological and political science literatures (see tor example, Hechter (1987) and Horowitz (1985 and 1992), IF conflict is persistent, then it seems very likely that this distinction is important in determining the equilibrium degree of conflict ‘This is so since « worker wio anticipates upwards social mobility will be less likely to engage in conflict if the effects persist into the state where he becomes a capitalist. The expectation of mobility reduces the ineentives 1 initiate conflict With ethnic groups this calculation seems irrelevant. In this paper Taito to formalize and investigate this intuition, While plausible, it seems highly likely that a comparison of the extent of ethnie versus class con- flict would depend on factors other than social mobility, for example inequality, ‘r perhaps the relative size of the groups. I conduct this comparison in a model ‘which assumes that objectives of etlinie groups are economic. While undoubtedly 2 simplification, this point of view finds support in the literature on ethnicity intensi Of paral interest isthe fining of Fasesy smd Levine (1997 tat te exceptionaly show growin Anca canbe petal) aecovited for by enietrsmentatay They conjectore tt de {aus mechanise Linking this to growth i via confit. One of the objects of this pape 0 lovesigate ths conser. Foe te sake of argument lets acespt hat confit le to poor seonomi Derformanes this ease wile vay te tue tha this iontity i vo alent in Afi, why shoul cont long ens lines Be any more damaging thae other types of confit (for example along, religous orcas ies)” ©The inuton for ths is sia 0 hat investigated an Wright (1986), Moene and Wallerstein (1997) smd Benbow and Ox (1998) in tee stakes OF the ipiations of wil bits Joe the ferences of agente vert rs,a 1A, Robinson example Bates (1983) argues, “Eihnie groups persist largely because of their ‘capacity to exiract goods and services from the mexlern sector and thereby satisly the demands of their members for the components of modernity. Insofar as they provide these benefits to their members, they are able to gain their support and achieve their loyalty.” ‘The results ofthe paper are as follows: contrary to what many believe,” even in the absence of social mobility ethaie conflict ean be worse than class conflict. Indzed, ethic conflict ends to be worse than class conilict when the disiibution ‘oF income in society is relatively equal T show that while the extent of class conflict is increasing in inequality, the extent of ethnic conflict may be either monotonically increasing, decreasing or even independent of inequality. Essen- Ually, though ethnic conflict rends to increase as inter-group inequality increases, such inequality is not immediately deducible from socio-economic inequality as usually measured. The effect of inequality on ethnic contiict depends on the socio-economic composition of the ethnic groups, If these are “unbalanced” in the sense that one group contains mostly capitalists while the ether contains ‘mostly workers, then conflict increases with inequality since ethnic conBict ap- proximmates a situation with class conflict. On the other hand, if ethnic groups are “balanced,” in the sense that each group contains similar proportions of the total fnumber of workets and capitalists, then ethnic conflict increases when income is distributed more unequally becween the groups, ut changes in this distribution are relatively insensitive changes in inequality. In one patticularly interesting case (Which as we shall see will Be the natural outcome of a stationary eqilts- ium of the model with mobility) where ethnic groups are exactly balanced ia this sense, the extent of conflict is independent of inequality, Turning now wo mobility, 1 show again thut the conventional wisdom, that socio-eeonorie mobility tends to reduce the extent of class conflict relative to ethnic conflict, is not generally correct. Whether it holds depends on exactly how fone measures mobility. If there are (wo groups and higher mobility involves a higher rate of exit from one group only, then the ditect effeet on the group which experiences a higher probability of outward mobility is to reduce conflict (for the conventional reason}, However, such mobility alters the relative sizes of the zroups. In the model 1 consider (and in many natural models) this “group size effect" generates incentives which work in the opposite direction making the total impact of mobility on coniet ambiguous. ‘What are the implications of these findings? Firstly, it helps to understand why the findiog about the relationship between conventional measures of inequity (or example the Gini coefficient, or the ratio of the income shares of the top 10% to bottom 10%) and the amount of confit does not lead to a robust cross For example, Horowitz (1985, 90) says “al Maca been right sbout the cased shure’ of ‘ls afiaions, he would surely have Beeb describing an explacive confit sation, The Utes between contestants wr he fa and fs, the kes high” He seins to accep the premise ta ia he absence of mobility class camfict would infact Be te worst set of comic 1 se the word “ineguniy” sn the standard economic zane and with weferences W sanand measures (sich asthe Gini coeficiend. When I cefer to inequity between ete grovps I shall Spoitsailyeissngisn Ins rom the anda deiniton,Social identity, inet al otic, ae ‘country relationship between inequality and growth.’ This is not because the conjectured relationship between inequality, conflict and growth is irrelevant, bul rather because conventional indices of inequality may not capture the relevant measure of inequality for conflict. As the paper shows, this depends who is in cconfliet with whom The results also helps us to understand why these is $0 much conflict in Africa despite the fact that many African countries appear to be rather equal (at least ‘compared to counities in Latin America). This is because the salient cleavage in Alia is ethnicity and the conventional data on income distribution do not well ‘capture the relevant nature of inequality, As a corollary, the model also suggests why ethnic conilict may he so bad in Africa since it suggests that elbinie conflict may be the worst Sort of conflict to have in societies where income between classes is distributed relatively equally. Policy changes, such as market liberalization and deregulation which affect socio-economic inequality will have very different implications depending on the nature of group cleavages. In the African case this result is grounds for optimism, If economic liberalization increases inequality (as many believe, and which is strongly suggested by the recent experience in the former Soviet Union and Latin America) then this does aot necessarily cause large wensions in society when ethnicity is salient. However, this result is not true in ethnically divided societies where agents who benefit most from liberalization are concentrated in one ethnic group. Thus, in ethnically divided societies such as Malaysia, Indonesia, Uganda or South Attica, where the gains of liberalization seem likely to be concentrated in one ethnic group (amongst the Chinese in the first two, the Indians in the second or the white in the latter), liberalization may exacerbate contict. The results of this paper also have interesting implications for the question ‘of how to consolidate democracy. An influential view of democracy sees that as an institutionalized method of solving conflict (see Dahl (1971) and Preeworski (1991) for influential statements and Acemoglu and Robinson (2000b) for a for ‘mal theory). IF a group of agents lose an election and are excluded from power then they have a future chance of attaining power. If this chance is sufficiently high and the future is aot discounted wo heavily, then groups that lose elec tions may refrain from engaging in open conflict and continue to “play by the ‘democratic rules.’ This seems to be dhe idea that many have in mind when they conjecture the difieulty of eonsolidating, democracy in Africa due to the itrans gent nature of ethnic conflict (see Horowitz (1985) for ceview of this literature), Yet the model of this paper docs not suggest that this is so. Many Western Euro- pean countries created and consolidated democracies during the late 19th century ‘at very high levels of inequality," though they sere dominated by class cleav- ‘ages, Tt could be that the combination of 2 particular pattern of inequality and Jougignon (1998) for an gueritive view. The relaionsip disappears once regional lata ae snlude ithe statistic model "See Acer a bins (200, For example, at arourd the me afte Second Reform Actin Briain (1867 income inequality was approsinatey she same a i modem Bru on Seu Afca tbe two mes ues sees on ea% LA, Robinson ethnic divisions in many modem African countries is inauspicious (in the sense ‘of generating a lot of underlying conflict), but it seems improbable that it could be worse than the situation European societies faced and solved. ‘The paper proceeds as follows. In the next section I build the basic dynamic model of group conflict. Since the model with social mobility is necessarily more complex I begin with the simpler case of zero mobility since this already ‘generates some interesting results. In Sect.3 I then extend the model to consider the effects of mobility. Section 4 concludes. 2, Class and ethnic conflict in the absens ¢ of social mobility 2.1. Fundamentals: Economic structure and group dynamics 1 consider a diserete time, infinite horizon, economy wich consists of non overlapping sequence of generations with each one consisting of two-period lived agents." Bach generation consists of a large number m agents who will be differ- entiated according to whether they are workers or capitalists, and whether they tre members of one of two ethnic groups, called groups A and B. The economy is an endowment cconomy with a single consumption good which is the numeraire and has its price normalized to unity. All agents have identical preferences and their objective funetion is the expected present discounted sum of consumption over their lives, ¢ + 5E;cvs1, where 5 € (0,1), ¢, is consumption by an agent born in period 1 in periods s = 1, +1, and E; is the expectations operator con- ditional on all information available at time 1. Ageats are not altruistic towards descendents ‘As will be discussed shortly, groups are either in or out of power. Groups in power make no decisions, but groups out of power have one unit of time during youth which can be allocated either 10 earning income or contesting political Power (engaging in conflict). Let w(1 ~ e*) and (1 — e°) denote the incomes ‘of workers and capitalists in any period when they allocate e¥ and e© units of| time to conflict. w and r are exogenous, The total income of the economy in any period is y. shall assume that nw = (1 —8)y, while n®rr = @y where # € (0, 1) parametrizes inequality (in the sense of factor shares) and n™ +n® = n. Apart from their class differences, agents are also members of ethnic groups A and B. The population is split exogenously into these two groups with a proportion A € (0,1) of agents belonging to group A and 1 — X belonging to group B Thus, +n = An and 2 +n! = (Ax where n,n are the numbers of workers and capitalists in ethnic group g = A... In the first section of the paper without mobility n°, n%", and a2 are all exogenously determined. In the next section, however, they will be endogenized and will depend on the mobility probabilities. In this section, therefore, let a proportion a of workers and a proportion 3 of capitalists be from group A, with respective proportions TT See Peo (19) snd Hourguignon and Venter (1997) for models witha relted dynamSocial identity, inequity and conic o1 1a and 1 — 9 being from group B, Thu nf (1 — an and 4° = n°, n™ = (1 — n°. In this notation the proportion of total income that scerues 0 group A is, Lo( ~ 8)+ 38) 2.2, Fundamentals: conglict ‘Apart from this specification of the economic structure of the model and the nature of groups, there is also the possibility of condict between dhe groups. 1 assume that conflict occurs along group lines and is mutually exclusive: moreover 1 formulate the objective functions at the level of the group and abstract from all issues of collective action, Conflict is either capitalist against worker, or A against B, but aot both at the same time, The objective of the analysis is to compare these different situations. As discussed in the introdvetion, the most plausible setting for such conflict is that of politics. T therefore assume that in any period one group of agents has political power, while the other does aot ‘The group without power can allocate time to contesting power. To model this T assume that political power changes hands with probability <{.), which is. a strictly increasing, concave and difterentiable function of the time allocated to contesting power, denoted e.!” For analytical tractabilty I shall use the specific functional assumption that se) =e whete 7 € (0,1) assume that the benefit ftom being in power is that resources can be extracted from the group out of power. To model this I assume that an exogenous proportion + (which I shall refer to as taxation) of the income of the group out of power is tansferred to the group in power. 2.3. Analysis: Class confiicr First begin with the intertemporal payoffs of a generation of workers in period + in the case where capitalists hold political power, which I denote V™.'* This is Ve = nun (1 =e) 46 [e™) fon + rant] +1 ~ dle) ~ dun a If capitalists have power then worker's wages are taxed. Part of their time, e", is however allocated to increasing 4), the probability that they control power in the next period. I they do so then they get their wage and the rents from taxing capitalists, w+ rn, wheress if they fail to gain power they are again taxed receiving net income of (1 ~ r)w."* Optimal ime allocation satisis, 2 Te would be easy to extend the model 1 allow the probity wo increase with the elt of the group out of power and dere withthe cot of thoxe with power. Nevertheless, [ Jot foemally develop this extension here Heese qualtiely sila eis ener andthe aay ‘mach more invalvas "Since raps in power a make decisions do nt induce aaaton for their pays. Recall hat effort decisions are ony relevant in youth ad dus old age income saat.2 LA. Robinson Noting that, = time allocated to contesting power is inereasing in inequality. Letting oe) find equation 2) immediately shows that 2° > 0 so thatthe -nu-0)7 ( 0 | ai oor Similarly, I can write the payoffs for an arbitrary generation of capitalists who hold power as Vo = (rant e545 [ie [ané + run] + (1 MEI — Tan]. ‘The first-order condition for the problem of maximizing with respect to e® can be easily solved to give, 70 dl © Ic follows immediately fom these expressions that when # > $, e > 6 Workers allocate more to conflict both because, since 1 < 7 the opportunity cost is lower and also, for the same reason, because the relative gain from taking power is larger T now delne a simple measuse of aggregate conflict for this economy. Note that the optimal valucs of e* and e® induce a Markov chain whiel governs the ‘evolution ofthe economy between the two states, {workers in power, capitalists in power}. Using the propeities of the limiting probability distribution of these states one can calculate the average amount of ime thatthe economy is in each. Straightforward caleulation shows that 5-272 isthe average amount of time that workers ure in power, and gS is the average amount of ime that capitalists are in power, Let £2°"(6) denote the average amount of class conflict, in the economy. It is this which I wish to compare under different assumptions bout the siucture of group confit. I define this inthe following way, iggy) = Het) + ole" 96tgy = HEHE Bee O-~ Fe+ He") Its easy wo sce that £%(0) is strictly convex, sect decreasing for 0 € (0,4) and strictly increasing for @ € (4,1), Thus the average amount of conflict is minimized when 0 = $ and increasing in inequality. The result that inequality increases the equilibcidm amount of conilict arises because conflict effort is a convex function of inequality, which in turn stems from the assumption that ¢ is a concave function. While, for example for @ > 4, higher 6 reduces the conflict, efor of capitalists, it increases the confit effort of workers at arate faster than ‘the rate at which that oF capitalists falls Other comparative statics of 2°4(#) are intuitive. For example, 012°%(0)/Ar > (0: the greater the ability of those with politieal power to extract resourees from those without power, the greater the ‘stakes,” the more desirable itis t0 attain power and therefore the greater is conic.Social Kemi, inequality and conte: os 24, Bihnie conflict To model ethnic conflict I begin by ce-sriting the above equations. “As in the previous section I assume that the allocation of resourees lo conflict takes place at the group level, therefore, leling V2 represent the expected lifetime utility of group 9 =, 8 when the other group is ia power, I tind, vA = 1-7) fund ean] eA) 85 [ole") [fun®™ & xn] 4 from unt HL = eA = 7) [roe © ‘The first-order condition is, oa Equation (7) shows that e* is inereasing in the extent of inter-group inequslity ‘The greater the income of group B relative to that of group A, the more resources will A allocate 10 gaining power. To investigate how intergroup inequality is affected by economic inequality as conventionally measured [use the definitions above to write the relative income term in (7) a8, wnt nl (al 04 ie wn eae ol — 8+ 58 ® ‘This immediately gives the first result whose proof follows direetly from (8), Proposition 1 (1) ifeach ethnic group contains the same proportion of capitalists and workers 30 thot «= 3, then intergroup inequality i unafected by changes in inequality. (2) If these proportions are different, ihen higher inequality increases the income share of the group which has a higher proportion of capitalists than ia does of workers Proposition 1, while simple, shows that in general both class and ethnic conflict depend on inequality as conventionally measured. Only in an apparently very singular ease is the incentive to engage in ethnie conflict independent of 6 now consider whether, even in the absence of social mability, ethic coallict ccan be worse than class conflict. Note that from (6) and (7) we ean see that e? satisfies oe Now I find Dial - 8 +5 oar and, d= ~ ox -o)+0 =3H)o LA, Robinson It is immediate from these expressions that 2% < if 3 > a while %° > 0 under the same condition Following the diseussion in the previous section [denote the extent of ethnic conic by 2°7(0) winch has the following expression, eet + ote? ye® oF Om Ge ate) Lis easy to see that the properties of 2°7(0) are closely related to those of 20), In patticular itis strictly couver. However, 2 (0) is not now minimized at = J. Again, the convexity of e? as a function of relative income implies that hhigher inter group inequality leads to higher aggregate conflict. The interesting question here, however, is how this relates to 8. It is clear that total eontiet is minimized when income shares are equal (the @= 5 case with lass confit) and this occurs with ethnic confliet when ® = 52. Depending on the values of and 9 this ean be gronter or less than 5. In fa 2°) cao be monotonically decreasing or increasing tor all 6 © (0, 1]. For example, if 9 = F then £2°(@) is minimized at 6 = | for alle (the minimizer is not unique if d = 1). On the other hand, if = | then 2°" (9) is mininized ut @=0 for all 3 Wis interesting to understand what these cases imply. Notice that, when a > A, a8 6 inceesses above zero the income of group A falls while that of H rises, This fll in the relaive incomes of the groups teduves confit However, the rate of change of the incomes is sulicently slow that conflict is monotonically decreasing for all @ © (0, 1]. Changes in @ do not equalize the incomes of the two groups (ihe condition under whieh conflict is minimized. ‘This situation is very diferent to one with class conflict. With ethnic conflict, an inerease in @ tends to redistribute income in favor of ene group rather than another, but not necessarily in a way which switches their relative positions. It 1s this which implies that 2*(0) may be monotone in 8, which is never the ease with 2°48, The other case, where = | but ex < 5, is similar except the roles of the groups are reversed (with the identity of the gaining and losing groups being switched. ‘This gives the following result which summarizes the most interesting lessons of the section Proposition 2 Ever in the absence of socio-economic mobility it iy not neces- sarily true that a soviesy where social cleavages are in terms of social class ex periences more conflict shan one in which ethnicity is the dominant cleavage. In general, in more equal societies, ethnic conflict tends to be worse than class conflict. Moreover, higher inequality may lead to greater or less ethnic conflict 3. Social mobility now introduce social mobility into the model of the previous section. Agents now switch exogenously between being capitalists and workers, but there isSocial identity, ineity snd eomBice 9s ‘no mobility between ethnic groups. The transitions between social classes are governed by a stationary Markov chain so that in each period there is a probability P-€[0,1) that a worker becomes a capitalist in the next period while there is a probability g € [0, I] that a capitalist becomes a worker. This gives the transition matrix, Clq ing 1 shall focus on stationary equilibria. Note that, by the law of large numbers, the transition matrix implies the following stock dynamics, 1 = pn? + anf iy, = pms? +1 gine In a stationary equilibrium where nis, = mp" = a and ny = nf = n° these equations imply that n/n = q/p. Using, n® +n = I find that the stationary populations of workers and capitalists are, n™ = 2, n° = 2%. In the case of cthnic groups, nfty = nf = no and ny = nf = n2 for g = A,B, so that n& Jno = q/p. Using the definitions above (ie. nf +n!* = An) the stationary populations are a = AS," = 3 and nt = Wade, = CNH Ip the model with mobility, given a division of the population into ethnié groups, the stationary distribution of members of the groups between capitalist and worker is determined endogenously by the mobility probabilities, rather than just postulated a in the previous section, ‘These derivations shed an imeresting light on Proposition 1. Note that, in terms of the notation of Sect.2. we now have, a = = A. When mobility is iroduced, in a stationary equilibrium the proportions of capitalists and workers within each ethnic group are equal. This gives the following interesting result. Proposition 3 in a society with mobility between social classes, in a stationary state, inter-ethnic group inequality is unaffected by changes in socio-economic inequality I now re-consider the nature of class conflict. To formulate the objective function for workers at date ¢ note that, in maximizing the welfare oftheir current ‘group they must take into account that, at the next date part of Uie current group (by the law oF large numbers a proportion p) will have become capitalists and in the event of power switching hands will not benefit. Agents who are mobile between the two dates clearly do not benefit from resources allocated to gaining power though ex ante no worker knows who will switch. This gives the following expression for the expected utility of workers, ve sre eco pm” (we 2) soc] 21-40» [tox ryan om (2222) 1. 096 JA, Robinson I is important to understand the meaning of the right-side of (10). In the case ‘where power switches a proportion 1p of the workers at 1 are still workers at 1+ 1 in which case they benefit from power getting a payoif of w+ 7x2 /n” (where the tax revenues extracted from capitalists have to be shared with all workers at date #+1). However, a proportion p of the workers become capitalists and thus are taxed at rater. Notice that in deciding e* at date ¢ workers do ‘ot therefore take into account the preferences of current capitalists who will bbe workers in the next period. In the case where power does not switch, people staying workers continuc to be taxed, while those who become capitalists instead benefit from being part of the ruling group. The problem of choosing e* to maximize (10) has the first-order condition (Gividing through by wr), Lar eseterr [a (1+ 2) -» (E+E) 7 voy 7. [= pin = pn” soley 2, [Moree] Ic follows that 9° < 0, Higher social mobility leads workers to reduce the amount of time they allocate to contesting political power. Using the above efintions, “=e =r" = ee" and thus in a stationary equilibrium e* depends on both p and ¢ ‘Writing down the analogous expression for V* the important point to note i that itis the probabilities q and 1 — q that are relevant in this case. It is then easy to sec that &° must satisfy the following fistonder condition, yet [Uae =a 1 r=eate5 [' oa =| vith, Cooter = damper? ‘What i the effect of mobility of class confit (as measured in Sect.2). This depends on how mobility is measured. Consider fist an increase in p. In the model conflict is persisent in the sense that it alters the future political stat. ‘The direct effect of higher p is to reduce the incentive of workers to engage in conflict for the conventional reason. However, as p increases with q constant there isan induced “group size effect’ This comes from the implied increase in the relative size of the group of capitalists relative to workers. In a sttionary ‘equilibrium it mast be true that n/a = g/p, thus if pis higher, tne relative size of the group of workers must be larger ip equilibrium, The higher is relative twn®, the less atractve its for workers to gain power, and this tends 0 reiaforce the eifect of p inducing lower e*. However, its clear that for eapitalists, since the direct effect is absent (@ is constant in this thought experiment, the only thing left 8 the “group size effec’. This tends to inerease the amount of time that capitalists allocate to conflict. For my measure of aggregate conflict this tends to offset the effect of p on e and thus renders the aggregate effect ofSocial identity, inequality ant cnt ” this measure of mobility on conflict indeterminate, If we consider the ease where P= q then higher p simultaneously increases g. In this special case the group size effect vanishes and conflict unambiguously falls, To write the objective function for group A in the ease of etbnie conflict with social mobility note that, by the law of large numbers, at the end of any period 1 proportion p of the workers of group A will have become capitalists, while similarly, a proportion g of the capitalists in group A will have become workers However, in a stationary state, for a group deciding at time ¢ on the amount of resources to allocate, the group will be identical at date r+ | in terms of the proportion of capitalists and workers. To see this note that the objective function can be writen as, P48 = >) [un +n] ce) +5 (te!) [pax =~ pre wt gn w+ gala sr [un + an ]] + (1 = (04) [0 = 2) [pte + (1 — pw sq 4 0 —aye"*x])} av Here paz (1 — pyr w+ qn w+(1 —g)n*z is the expected pre-tax income ‘of the group in the next period given the mobility probabilities, However, in a stationary equilibrium, nw = (1 — pn + gn" and n* = (1 — g)n" + pt Ie is immediate therefore that the extent of social mobility has no impact at all ‘on the behavior of an ethnic group since the objective function (13) collapses io (6) in Sect. 2.4, ‘The following result summarizes the main impli tions of this section, Proposition 4 While eahnic conflict ts mdependent of the extent of social mobility, lus effects on elass confict are ambiguous. While the direct effect is to reduce the incentive io engage in confit, the indirect ‘group size effect’ tends to increase the amount of confict 4, Conclusion ‘This paper developed a simple framework to make some tentative progress on some of the fundamental issues about group conflict. These are, firstly, how does the type of group alfect the amount of coniict in equilibrium, Secondly, how is this affected by the extent of inequality between groups and how is this related to conventional measures of socio-economic inequality. Thirdly, how does differential mobility between groups affect outcomes. ‘The main findings of the paper were as follows. Contrary to the conventional wisdom in the social science literature, itis not generally ue that class cont is worse than ethnic conflict. In a natural model of conflict it is the extent oF incer-group inequality that is the erucial factor in determining the level of conflict and there is no a priosi reason why the extent of inequality between social classes should be greater than that between ethnic groups. ladeed, | showed that ethnic, conflict tended to be worse in situations where inequality, as conventionallyo# 1A, Robinson measured, was low. Moreover, the analysis did not substantiate the intuition that social mobility is necessarily an important mitigating factor. Although the direct effects of social mobility tend to reduce the extent of class conflict there seem to be important indirect effects working through the relative size of groups which ccan oft this. [ showed that, if workers became more mobile in the sense that in any period the probability that a worker was a eapitalist in the next period increased, while this reduced the incentive of workers to engage in conflict, in 2 stationary equilibrium it actually increased the incentives of capitalists to do so. The aggregate impact on conflict is therefore ambiguous. I argued that these results have some interesting implications for the literature linking inequality and conflict to comparative economic development. References ‘Accmogls, D_ and Rebisson, A. (2000) Why did the West extend he Franehise? Democracy, inequality and growth in bstorcal perspective. 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