From Rags to Riches: The Economics of Deprivation, Conflict and the Welfare State
Dominic Rohner (University of York, University of Oxford)
Abstract: Historical evidence has taught us that it is often the poorest and most deprived people in unequal societies who are recruited to fight in civil wars. The present contribution constructs a theoretical model of the choice between appropriation and production, where conflict is represented as mutual stealing. Fully specified production functions allow for both symmetrical outcomes and for introducing inequalities in abilities and endowments. It is shown that people with lower marginal returns to productive activities due to lower ability, fewer endowments or discrimination are more likely to choose appropriative activities. Further, it is examined theoretically under what conditions welfare state policies such as redistribution of income and capital, as well as education, health and poverty-alleviation spending, can lead to less appropriative activities. Finally, empirical evidence is presented that is consistent with the theory.