Fanning the flames: Rainfall shocks, inter‐ethnic income inequality, and conflict intensification in Mandate Palestine

We examine the effect of inter-ethnic income inequality on conflict intensification in Mandate Palestine, using a novel panel dataset comprising district-level characteristics and conflict intensity across 18 districts during 1926–1945. We instrument Jewish-Arab income inequality by combining the annual variation in rainfall shocks with cross-sectional variation in pre-Mandate crop intensity, to extract exogenous changes in inequality between non-agrarian Jews and agrarian Arabs. We find a substantial effect of inequality on conflict intensification, especially during periods where the relationship between Arabs and Jews were particularly strained. Our estimates are driven by Arab-initiated attacks, reflecting the local average treatment effects of Arab farmers who move from agrarian work to violence in response to adverse rainfall shocks; in other words, economic shocks coupled with existing economic segregation facilitate the transition into violence when opposing groups are economic substitutes. Further investigations suggest that inequality-driven violence was most likely an expression of resentment, rather than the result of opportunity costs or appropriation.