My empirical findings demonstrate that although ethnic heterogeneity was important, it was not a sufficient cause for the onset of violent ethnic conflict. Ascriptive identities did not lead to a smooth and effortless ethnic mobilization. Capitalist expansion may have increased national and inter-regional income inequality within Ethiopia, but it did not disadvantage Eritrea. If income inequality and economic marginalization and exploitation by the center were the dominant reasons for the outbreak of ethnic conflict, the southern, coffee-producing regions would have led the ethnic mobilization. If anything, Eritrea benefited from the increased integration of the Ethiopian economy in the international economy far more than other regions. Inter-ethnic, elite-level agreements between Eritreans and Amhara did not break down; at the very least they strengthened over the course of the federation years and in the beginning of the unification period, even incorporating sectarian differences. Finally, in terms of arguments that stress Eritrea’s exploitation by the central Ethiopian state, I rebut this claim by showing that Eritreans commenced an ethnic mobilization drive even when their benefits and assistance from the center were increasing. My argument focuses on the causal relationship between the intra-ethnic elite-level competition for leadership over the Eritrean and the economic policies that the Amhara imposed on the Eritreans in the imperial era of the Ethiopian state. The Eritrean ethnic mobilization drive turned violent when elite-level, intra-ethnic Eritrean divisions interacted with the income effects of the economic policies imposed upon the average Eritrean ethnic group members by the Ethiopian state: economically-dependent Eritreans prodded their ethnic group leaders in a series of bidding wars with each other that made peaceful accommodation with the Amhara leaders of Ethiopia infeasible. To illustrate this argument, I proceed as follows: I present the incorporation of Eritrea within Ethiopia after Eritrea’s decolonization, examine the intra-Eritrean divisions and their relationship to the Ethiopian imperial centers, show how the economic policies that the Ethiopians imposed upon Eritrea impacted the Eritrean ethnic mobilization drive, and then show how economically-dependent Eritreans incentivized rival Eritrean political leaders to engage in outbidding with respect to the Ethiopian authorities.