Workers, Warriors, and Criminals: Social Conict in General Equilibrium

We analyze how economic shocks and policies a¤ect the intensity of social con‡ict. We show that not all shocks that could make society richer reduce con‡ict. In our model, positive shocks to labor intensive industries diminish social con‡ict, while positive shocks to capital intensive industries increase it. The key requirement is that appropriation activities be more labor intensive than the economy. Our theory explains empirical patterns of con‡ict, for example, the positive association between crime and inequality, and the curse of natural resources. Including appropriation activities into a canonic general equilibrium model helps explain why reforms that appear e¢ ciencyenhancing a priori may be delayed and become unpopular when implemented, and why societies may sympathise with some populist policies and seemingly ine¢ cient redistribution. JEL Classi…cation: D72, D74, D78, F13, H23, K42, O1. Keywords: con‡ict, civil war, crime, social constraint, populism, trade policy, inef…cient redistribution. First version of this paper: May 2004. We thank Anna Aizer, Rafael Di Tella, Oded Galor, Herschel Grossman, Juan Carlos Hallak, Ben Hermalin, Daniel Heymann, Edward Miguel, and Howard Rosenthal for useful comments and suggestions, and also Costas Azariadis and Simon Johnson for perceptive discussions of the paper.