Globalization, the discovery of natural resources and the development of international trade promise much to developing societies in the way of economic and political development but often deliver inter-ethnic conflict and the impoverishment of indigenous communities. This research project focuses on understanding the role of international trade in inter-ethnic violence and in shaping adversarial political coalitions, as well as the mechanisms through which trade can be harnessed to support peaceful co-existence, indigenous entrepreneurship and support for reforms.
A short policy-oriented overview of the religious tolerance component of the research has been published in the EPSJ.
In Trading for Peace, I examine the conditions under which trade can support peaceful coexistence and prosperity when particular ethnic groups are cheap targets of violence. A simple theoretical framework reveals that for a broad set of cases, while inter-ethnic competition generates incentives for violence, the presence of non-replicable, non-expropriable inter-ethnic complementarities become necessary to sustain peaceful coexistence over long time horizons. In addition to complementarity, two further conditions are important for deterring violence over time. When relatively mobile ethnic groups (eg immigrants) are vulnerable, a credible threat to leave can deter violence. When less mobile (indigenous) groups are vulnerable, high monitoring costs that allow them to withhold production can improve their gains from trade. I describe the implications for indigenous entrepreneurship and cultural assimilation, the development of local institutions supporting inter-ethnic trust, immigration policies and policies aimed at mitigating ethnic violence through financial innovations. I illustrate these implications using contemporary evidence and historical cases of organizations and institutions created to engender trade and support peace drawn from Africa, Asia, Europe and Latin America.
Trade, Institutions, and Ethnic Tolerance: Evidence from South Asia provides evidence that the degree to which medieval Hindus and Muslims could provide complementary, non-replicable services and a mechanism to share the gains from exchange has resulted in a sustained legacy of ethnic tolerance in South Asian towns. Due to Muslim-specific advantages in Indian Ocean shipping, inter-ethnic complementarities were strongest in medieval trading ports, leading to the development of institutional mechanisms that further supported inter-ethnic exchange.
Using novel town-level data spanning South Asia's medieval and colonial history, I find that medieval ports, despite being more ethnically mixed, were five times less prone to Hindu-Muslim riots between 1850-1950, two centuries after Europeans disrupted Muslim overseas trade dominance and remained half as prone between 1950-1995. Household-level evidence suggests that these differences reflect local institutions that emerged to support inter-ethnic medieval trade, continue to influence modern occupational choices and organizations, and substitute for State political incentives in supporting inter-ethnic trust.
This paper was awarded the 2014 Michael Wallerstein Awardby the American Political Science Association for the best article published in political economy in the previous calendar year .
'Unfinished Business': Historic Complementarities, Political Competition and Ethnic Violence in Gujarat examines how the historical legacies of inter-ethnic complementarity and competition interact with contemporary electoral competition in shaping patterns of ethnic violence. Using local comparisons within Gujarat, a single Indian state known for both its non-violent local traditions and for widespread ethnic pogroms in 2002, I provide evidence that where political competition was focused upon towns where ethnic groups have historically competed, there was a rise in the propensity for ethnic rioting and increased electoral support for the incumbent party complicit in the violence. However, where political competition was focused in towns that historically enjoyed inter-ethnic complementarities, there were fewer ethnic riots, and these towns also voted against the incumbent. These historic legacies proved to be important predictors of the identity of the winner even in very close electoral races. I argue that these results reflect the role local inter-ethnic economic relations can play in altering the nature and the benefits of political campaigns that encourage ethnic violence.
In Conquered But Not Vanquished: Complementarities and Indigenous Entrepreneurs in the Shadow of Violence (in progress), Alberto Diaz-Cayeros and I examine the fortunes of indigenous communities following arguably one of the most traumatic moments in history-- the Conquest of Mexico. Producers of cochineal dye--New Spain's most valuable processed good- provided a complementary service that was both hard to replicate and to expropriate, due to its fragility and the embedded human capital involved in its production. We exploit micro-climatic variation in cochineal production in the growing season to trace the effects of cochineal production on pre-Columbian communities. We show that cochineal producing settlements were more likely to survive the Conquest, exhibited greater capital accumulation on the eve of the Revolution (1910), less support for the hegemonic party thereafter, and more small firm creation, greater benefits for women and the indigenous, its main producers, in 2010, 150 years after it was displaced by synthetic dyes. However, cochineal producing municipios show greater evidence of cultural assimilation as early as 1790, were more unequal in 2010, and were less likely to adopt highly redistributive indigenous political institutions (usos). We contrast the performance of these municipios with others producing valuable goods that were easy to expropriate, such as gold or silver, and or easy to replicate elsewhere, like cacao. We interpret the effects as reflecting how robust inter-ethnic complementarity permitted the development of indigenous entrepreneurs despite the threat of violent expropriation.
In related work, my co-authors and I examine other effects of shocks to trading opportunities, both empirically, in the forging of a mass movement in favour of Indian independence and encouraging financial innovations that spread support for representative government in revolutionary England, and theoretically, in fostering social hierarchies that transcend ethnic divisions both in new markets today and in early human societies.
Related Articles and Works in Progress (working titles)
- Trading for Peace, Economic Policy, forthcoming, 2018
- 'Unfinished Business': Historic Complementarities, Political Competition and Ethnic Violence in Gujarat, Journal of Economic Behavior and Organization, August 2014
- Trade, Institutions and Ethnic Tolerance : Evidence from South Asia, American Political Science Review, November 2013.
- Maintaining Peace Across Ethnic Lines: New Lessons from the Past, Economics of Peace and Security Journal, July 2007
- Conquered but not Vanquished: Complementarities and Indigenous Entrepreneurs in the Shadow of Violence, June 2016, with Alberto Diaz-Cayeros
- A Theory of Community Formation and Social Hierarchy, Stanford GSB Research Paper 3467, August 2016, with Susan Athey and Emilio Calvano
- Forging a Non-Violent Mass Movement: Economic Shocks and Organizational Innovations in India's Struggle for Democracy, October 2014, with Rikhil Bhavnani
- Sharing the Future: Financial Innovation and Innovators in Solving the Political Economy Challenges of Development, in Institutions and Comparative Economic Development, edited by Masahiko Aoki, Timur Kuran and Gerard Roland, Volume I of the Proceedings of the 16th World Congress of the International Economic Association, IEA Conference Series 150: Palgrave Macmillan, November 2012.
- Financial Asset Holdings and Political Attitudes: Evidence from Revolutionary England, Quarterly Journal of Economics, August 2015.
- Financial Market Exposure, Complementarities and Support for Cross-National Unions: Evidence from Brexit (with Yotam Margalit and Moses Shayo)
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