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 annual variation in rainfall with cross-sectional variation in pre-Mandate crop intensity, to extract exogenous variation in inequality between non-agrarian Jews and agrarian Arabs. We find a substantial e ect 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 local average treatment effects of Arab farmers who move from agrarian work to violence in response to adverse rainfall shocks, suggesting that economic shocks coupled with existing economic segregation facilitate the transition into violence when opposing groups are economic substitutes. Further investigations reveal that inequality-driven violence was not the result of opportunity costs or appropriation, but rather an expression of resentment.