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“Economic Shocks and Civil Conflict: An Instrumental Variables Approach.”

In this paper, we take the economic approach to conflict seriously and apply it to Hindu-Muslim conflict. We construct a simple theory that allows us to link observable economic variables to conflict outcomes. We 1 Indeed, as Esteban and Ray ð2008Þ and Ray ð2009Þ have argued, there may be good economic reasons for conflict to be salient along noneconomic ð“ethnic”Þ lines rather than along the classical lines of class conflict long emphasized by Marxist scholars. his detailed reading of the manuscript, making many constructive suggestions that greatly improved both the content and the exposition. 720 journal of political economy This content downloaded from on Tue, 9 Sep 2014 10:18:07 AM All use subject to JSTOR Terms and Conditions use the theory to interpret new evidence on the relationship between income and violence in India. In the model ðsee Sec. IIIÞ, there are two groups: Hindus and Muslims. Depending on the circumstances, members of either group can be aggressors or victims in an interreligious conflictual encounter. We view such violence as decentralized, though it may take place against a backdrop of religious antagonism and orchestrated support from group leaders. Consider encounters across members of different religious groups: an accident, an assault or confrontation, an isolated murder or rape. When religion is involved, if only by chance, such encounters could boil over into a larger conflict or riot. A potential aggressor involved in the confrontation must decide whether to take advantage of the situation and frame it as a religious conflict, in which members of the other religion can be targeted. The act itself may be motivated by the prospect of economic gain ðvia direct appropriation or economic exclusion of the victimÞ or it may be the expression of animosity and resentment, as long as that resentment is sensitive to the economic situations of aggressor and victim. At the