Social Choice and Welfare

, Volume 53, Issue 1, pp 135–173 | Cite as

Inequality and conflict outbreak

  • Alberto VesperoniEmail author
  • Anıl Yıldızparlak
Original Paper


We model conflict as a multi-prize contest which takes place if a minimum number of players (which we interpret as social classes) reject the status-quo prize distribution. In the event of conflict, the status-quo prizes are reshuffled across players depending on their efforts. We first show that, for a broad family of contest models, equilibrium rent dissipation takes the form of a Generalized Gini coefficient of the prize distribution (also tackling the well-known issue of existence of an equilibrium). Secondly, we show that conflict occurs when inequality is low and deprivation (a concept that we define) is high, where these measures are computed with respect to the prize distribution. Thirdly, we find empirical evidence that supports our predictions using an unbalanced panel of 41 high and middle income countries, taking the number of labor strikes per capita as a proxy for the occurrence of conflict and measuring inequality and deprivation with respect to the income distribution.



  1. Acemoglu D, Robinson J (2000) Why did the West extend the franchise? democracy, inequality, and growth in historical perspective. Q J Econ 115(4):1167–1199Google Scholar
  2. Akerlof R, Holden R (2012) The nature of tournaments. Econ Theory 51(2):289–313Google Scholar
  3. Andonie C, Kuzmics C, Rogers B (2014) Efficiency based measures of inequality. Working paperGoogle Scholar
  4. Ashenfelter O, Johnson GE (1969) Bargaining theory, trade unions, and industrial strike activity. Am Econ Rev 59(1):35–49Google Scholar
  5. Auriol E, Renault R (2008) Status and incentives. RAND J Econ 39(1):305–326Google Scholar
  6. Autor D, Levy F, Murnane R (2003) The skill content of recent technological change: an empirical exploration. Q J Econ 118(4):1279–1333Google Scholar
  7. Baum CF, Schaffer ME, Stillman S (2007) Enhanced routines for instrumental variables/GMM estimation and testing. Stata J 7(4):465–506Google Scholar
  8. Benabou R (1996) Inequality and growth. NBER Macroecon Annu 11:11–74Google Scholar
  9. Besley T, Ghatak M (2008) Status incentives. Am Econ Rev 98(2):206–211Google Scholar
  10. Bester H, Wärneryd K (2006) Conflict and the social contract. Scand J Econ 108(2):231–249Google Scholar
  11. Beviá C, Corchón L (2010) Peace agreements without commitment. Games Econ Behav 68(2):469–487Google Scholar
  12. Bishop R (1964) A Zeuthen-Hicks theory of bargaining. Econometrica 32(3):410–417Google Scholar
  13. Bossert W, D’Ambrosio C (2006) Reference groups and individual deprivation. Econ Lett 90(3):421–426Google Scholar
  14. Brandl B, Traxler F (2010) Labour conflicts: a cross-national analysis of economic and institutional determinants, 1971–2002. Eur Sociol Rev 26(5):519–540Google Scholar
  15. Brunnschweiler C, Jennings C, MacKenzie I (2014) A study of expressive choice and strikes. Eur J Polit Econ 34:111–125Google Scholar
  16. Caruso R, Schneider F (2011) The socio-economic determinants of terrorism and political violence in Western Europe (1994–2007). Eur J Polit Econ 27:S37–S49Google Scholar
  17. Chakravarty S (2015) Inequality, polarization and conflict: an analytical study. Springer, New YorkGoogle Scholar
  18. Clark D, Riis C (1996) A multi-winner nested rent-seeking contest. Public Choice 87(1):177–184Google Scholar
  19. Clark D, Riis C (1998) Influence and the discretionary allocation of several prizes. Eur J Polit Econ 14(4):605–625Google Scholar
  20. Corchón L, Yıldızparlak A (2013) Give peace a chance: the effect of ownership and asymmetric information on peace. J Econ Behav Organ 92:116–126Google Scholar
  21. Cubel M, Sanchez-Pages S (2014) Inequality in conflicts. Working PaperGoogle Scholar
  22. Donaldson D, Weymark J (1980) A single-parameter generalization of the Gini indices of inequality. J Econ Theory 22(1):67–86Google Scholar
  23. Drugov M, Ryvkin D (2017) Optimal tournaments. Working paperGoogle Scholar
  24. Esteban J, Ray D (1994) On the measurement of polarization. Econometrica 62(4):819–851Google Scholar
  25. Esteban J, Ray D (1999) Conflict and distribution. J Econ Theory 87(2):379–415Google Scholar
  26. Esteban J, Ray D (2008a) On the salience of ethnic conflict. Am Econ Rev 98(5):2185–2202Google Scholar
  27. Esteban J, Ray D (2008b) Polarization, fractionalization and conflict. J Peace Res 45(2):163–182Google Scholar
  28. Esteban J, Ray D (2011) Linking conflict to inequality and polarization. Am Econ Rev 101(4):1345–1374Google Scholar
  29. Freytag A, Krüger J, Meierrieks D, Schneider F (2011) The origins of terrorism: cross-country estimates of socio-economic determinants of terrorism. Eur J Polit Econ 27:S5–S16Google Scholar
  30. Fu Q, Lu J (2009) The beauty of bigness: on optimal design of multi-winner contests. Games Econ Behav 66(1):146–161Google Scholar
  31. Fu Q, Lu J (2012) Micro foundations of multi-prize lottery contests: a perspective of noisy performance ranking. Soc Choice Welf 38(3):497–517Google Scholar
  32. Fu Q, Lu J, Wang Z (2014) Reverse nested lottery contests. J Math Econ 50:128–140Google Scholar
  33. Garfinkel M, Skaperdas S (2000) Conflict without misperceptions or incomplete information how the future matters. J Confl Resolut 44(6):793–807Google Scholar
  34. Garfinkel M, Skaperdas S (2012) The Oxford handbook of the economics of peace and conflict. Oxford University Press, OxfordGoogle Scholar
  35. Gary-Bobo R, Jaaidane T (2014) Strikes and slowdown in a theory of relational contracts. Eur J Polit Econ 36(3):89–116Google Scholar
  36. Goos M, Manning A (2007) Lousy and lovely jobs: the rising polarization of work in Britain. Rev Econ Stat 89(1):118–133Google Scholar
  37. Goos M, Manning A, Salomons A (2014) Explaining job polarization: routine-biased technological change and offshoring. Am Econ Rev 104(8):2509–2526Google Scholar
  38. Green J, Stokey N (1983) A comparison of tournaments and contracts. J Polit Econ 91(3):349–64Google Scholar
  39. Guariso A, Rogall T (2017) Rainfall inequality, political power, and ethnic conflict in Africa. Working paperGoogle Scholar
  40. Gubler J, Selway J (2012) Horizontal inequality, crosscutting cleavages, and civil war. J Confl Resolut 56(2):206–232Google Scholar
  41. Hamann K, Johnston A, Kelly J (2013) Unions against governments: explaining general strikes in Western Europe, 1980–2006. Comp Polit Stud 46(9):1030–1057Google Scholar
  42. Hayes B (1984) Unions and strikes with asymmetric information. J Labor Econ 2(1):57–83Google Scholar
  43. Hibbs D (1978) On the political economy of long-run trends in strike activity. Br J Polit Sci 8(2):153–175Google Scholar
  44. Hopkins E, Kornienko T (2004) Running to keep in the same place: consumer choice as a game of status. Am Econ Rev 94(4):1085–1107Google Scholar
  45. Hopkins E, Kornienko T (2006) Inequality and growth in the presence of competition for status. Econ Lett 93(2):291–296Google Scholar
  46. Hopkins E, Kornienko T (2009) Status, affluence, and inequality: rank-based comparisons in games of status. Games Econ Behav 67(2):552–568Google Scholar
  47. Hopkins E, Kornienko T (2010) Which inequality? the inequality of endowments versus the inequality of rewards. Am Econ J Microecon 2(3):106–137Google Scholar
  48. Huber J, Mayoral L (2016) Group inequality and civil conflict. Working paperGoogle Scholar
  49. Humphries C (1990) Explaining cross-national variation in levels of strike activity. Comp Polit 22(2):167–184Google Scholar
  50. ILO (2017) Strikes and lockouts by economic activity. Data retrieved from Accessed 23 Aug 2018
  51. Klose B, Kovenock D (2015a) The all-pay auction with complete information and identity-dependent externalities. Econ Theory 59(1):1–19Google Scholar
  52. Klose B, Kovenock D (2015b) Extremism drives out moderation. Soc Choice Welf 44(4):861–887Google Scholar
  53. Konrad K (2009) Strategy and dynamics in contests. Oxford University Press, OxfordGoogle Scholar
  54. Korpi W, Shalev M (1979) Strikes, industrial relations and class conflict in capitalist societies. Br J Sociol 30(2):164–187Google Scholar
  55. Lindvall J (2013) Union density and political strikes. World Polit 65(3):539–569Google Scholar
  56. Lu J, Shen B, Wang Z (2016) The beauty of parsimony in optimal contest design. Working paperGoogle Scholar
  57. Lu J, Wang Z (2015) Axiomatizing multi-prize nested lottery contests: a complete and strict ranking perspective. J Econ Behav Organ 116:127–141Google Scholar
  58. Lu J, Wang Z (2016) Axiomatization of reverse nested lottery contests. Soc Choice Welf 47(4):939–957Google Scholar
  59. Lustig N, Lopez-Calva L, Ortiz-Juarez E, Monga C (2016) Deconstructing the decline in inequality in Latin America. Inequality and growth: patterns and policy. Springer, New York, pp 212–247Google Scholar
  60. McConnell S (1990) Cyclical fluctuations in strike activity. ILR Rev 44(1):130–143Google Scholar
  61. Moldovanu B, Sela A, Shi X (2007) Contests for status. J Polit Econ 115(2):338–363Google Scholar
  62. Münster J (2009) Group contest success functions. Econ Theory 41(2):345–357Google Scholar
  63. Nalebuff B, Stiglitz J (1983) Prizes and incentives: towards a general theory of compensation and competition. Bell J Econ 14(1):21–43Google Scholar
  64. Olson M (1965) The logic of collective action: public goods and the theory of groups. Harvard University Press, CambridgeGoogle Scholar
  65. Paul S (1991) An index of relative deprivation. Econ Lett 36(3):337–341Google Scholar
  66. Piketty T (2015) About capital in the twenty-first century. Am Econ Rev 105(5):48–53Google Scholar
  67. Rees A (1952) Industrial conflict and business fluctuations. J Polit Econ 60(5):371–382Google Scholar
  68. Sachs J, Warner A (2001) The curse of natural resources. Eur Econ Rev 45(4):827–838Google Scholar
  69. Schweinzer P, Segev E (2012) The optimal prize structure of symmetric Tullock contests. Public Choice 153(1–2):69–82Google Scholar
  70. Skaperdas S (1996) Contest success functions. Econ Theory 7(2):283–290Google Scholar
  71. Solt F (2016) The standardized world income inequality database. Soc Sci Q 97(5):1267–1281 sWIID Version 6.2, March 2018Google Scholar
  72. Stewart F (2008) Horizontal inequalities and conflict. Palgrave Macmillan, BasingstokeGoogle Scholar
  73. The World Bank (2017) World development indicators. Accessed 25 Aug 2018
  74. The World Bank (2018) Commodity prices - history and projections. Accessed 25 Aug 2018
  75. UNU-WIDER (2017) World income inequality database (WIID3.4). Accessed 30 Aug 2018
  76. Vesperoni A (2016) A contest success function for rankings. Soc Choice Welf 47(4):905–937Google Scholar
  77. Weymark J (1981) Generalized Gini inequality indices. Math Soc Sci 1(4):409–430Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Faculty of Economics and Computer Science, Institute of EconomicsAlpen-Adria University KlagenfurtKlagenfurtAustria
  2. 2.Department of EconomicsDurham University Business SchoolDurhamUK

Personalised recommendations