Group Inequality and Conflict

This paper presents a theoretical model to show how distributional concerns can engender social confl‡ict. We have a two period model, where the cost of confl‡ict is endogenous in the sense that parties involved have full control over the level of confl‡ict they can create. Our analysis highlights the crucial role of future inequality. It is shown, equality of assets or income in the current period does not stop confl‡ict from taking place if the anticipated future inequality is signi…cant. Further we find that the impact of inequality on confl‡ict is not straightforward. Since confl‡ict is costly for both groups, societies with low levels of inequality show no confl‡ict; groups engage in confl‡ict only when inequality exceeds a certain threshold level. Additionally the model shows that the link between inequality and confl‡ict may be non-monotonic.