Ethno-economic Specialization and Intergroup Conflict

Abstract: All over the world market-dominant minorities are victims of ethno-religious hatred and violence. Focusing on pogroms, i.e., episodes of anti-Jewish violence, in the Pale of Settlement, where Jews were confined to live in within the Russian Empire, between 1800 and 1939, this paper aims to test the “scapegoat theory,” according to which Jews were blamed for all economic misfortunes of the majority and an alternative theory, according to which ethnic violence had pragmatic economic roots and ethnic violence is directly related to occupational segregation across ethnicities. In order to test these theories, we combine a novel panel data set on the professional and ethnic composition of the Russian Empire with data on pogroms and as well as historical weather and yield data. Using fixed-effects model, we document that occurrence of an extremely hot spring, i.e., growing season, leads to a fall in cereal yield. Then, we exploit weather shocks as an exogenous source of variation in income and and find that a negative income shock, i.e., hot spring, increase the likelihood of violence against Jews. More importantly, we find that the likelihood of anti-Jewish violence in the face of an income shock is higher in localities with a greater Jewish concentration in market intermediary professions, in particular, as money lenders. This impact is larger in rural areas and in localities where Jews are the second largest ethnic group. Our findings show that the occurrence of violent acts against a minority group is associated with the economic activities in which the minority group members are engaged and suggest that local farmers who got credit from Jews for their agricultural production might have chosen to organize an anti-Jewish pogrom in the face of debt repayment in the contingencies, when yields were low and it was harder than usual to repay.