The Dynamics of Horizontal Economic Inequality in Countries Affected by Ethnic Conflict - Policy Brief

This paper examines the dynamics of horizontal inequality in countries that have experienced ethnic conflict. This contrasts with previous studies which have focused on the effect of inequality on conflict. Understanding how conflict affects inequality serves to shed light on reasons behind conflict recurrence and slow economic development. The complex relationship between inequality and conflict is analyzed using both quantitative information, i.e., Demographic and Health Surveys (DHS) data from 36 countries for the time 1986-2018, and qualitative information, i.e., six country case studies. The focus throughout is on conflicts in which a rebel group claimed to fight the government on behalf of an ethnic group. The study also compares different inequality indicators suggested by the literature and provides arguments for why some of them should be preferred to others. Overall, the analysis shows that ethnic conflicts generally raise ethnic inequality. Furthermore, the way a conflict ends does not entirely determine the dynamics of horizontal inequality thereafter. The country case studies suggest that for a country to witness declining horizontal inequality following an ethnic conflict, these three conditions are important: (1) a swift victory of the rebel group; (2) financial resources to redistribute; and (3) a firm determination by the winner to redistribute. However, these conditions do not guarantee inequality decline. Therefore, the study suggests that it is important for policy makers to emphasize horizontal inequality reduction in the post-conflict period irrespective of how the conflict ended to avoid conflict recurrence.