Abstract
Human cooperation for reasons other than self-interest has long intrigued social scientists leading to a substantial literature in economics. Its complement – sectarianism – has not received closer attention in economics despite its significant impact. Based on a dynamic model, the paper shows that sectarianism can be understood as the outcome of a repeated bargaining process in which sectarian affiliation evolves into a pure coordination signal that attributes economic and political benefits. It demonstrates that such sectarian social contracts co-evolve with the sects’ degree of coerciveness and are self-reinforcing. Sectarian conflict may then not be a result of diverging religious ideologies but is shown to be caused by external manipulations of the signal (e.g. via identity politics), and internal political and economic grievances within a sect that spill over to the inter-sectarian level while adopting a sectarian appearance. Theoretical results are supported by empirical findings from the Middle East.
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