Abstract
A classical theme in social analysis views economic class divisions as the main cause of social conflict. Yet many, if not most of the conflicts we observe today appear to be ethnic in nature. It appears that the "vertical" nature of class divisions is often dominated by the "horizontal" antagonisms across groups delineated by noneconomic markers. This paper highlights the perverse synergy of economic inequality within ethnic groups, and its role in the salience of ethnic conflict. In a model of group formation which allows both class and ethnic groupings to emerge, we show that ethnic, as opposed to class, conflict may be focal, and precisely in the presence of economic inequality. (JEL D72, D74)
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