Published in
CESifo Working Paper 3699, 2012.
Abstract
We study the role of inter-group differences in the emergence of conflict. In our setting, two groups compete for the right to allocate societys resources, and we allow for costly intergroup mobility. The winning group offers an allocation, that the opposition can either accept, or reject and wage conflict. Expropriating a large share of resources increases political strength by attracting opposition members, but such economic exclusion implies lower per capital shares and higher risk of conflict. In equilibrium, allocations are non-monotonic in the cost of mobility. Moreover, limited commitment with respect to mobility gives rise to inefficient conflict in equilibrium.