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In this paper we try to elucidate the extent to which existing interregional inequality in aggregate productivities per worker within the European Union can be attributed to differences in the sectoral composition of activities, rather than to productivity gaps that are uniform across sectors. To this effect we use the shift-share analysis and show that regional specialization has a very minor role and that interregional differences can essentially be explained by uniform productivity gaps only. Our empirical results turn out to be statistically very significant and robust to different definitions of Gross Value Added (market prices and factor costs), different degrees of sectoral breakdowns, dates and alternative sets of countries. Our findings thus provide support to regional development policies focusing on actions producing uniform increases in regional productivities, such as infrastructures and human capital. (C) 2000 Elsevier Science B.V. All rights reserved. ; Financial support from the research grant CICYT PB96-0897 and the Fundació d'Economía Analítica is gratefully acknowledged. ; Peer Reviewed

Over the second half of the 20th century, the frequency of conflicts within national boundaries increased. One-third of all countries experienced civil conflict. There are two remarkable facts about social conflict that deserve attention: first, within-country conflicts account for an enormous share of deaths and hardship in the world today, and second, internal conflicts often appear to be ethnic in nature. Which factors influence social conflict? Do ethnic divisions predict conflict within countries? How do we conceptualize those divisions? If ethnic cleavages and conflicts are related, how do we interpret such a result? Is ethnicity instrumental achieving political power or economic gain? We provide indices of ethnic diversity in the society, fractionalization and ethnic polarization, and find significant relationships with respect to social conflict.

This paper contributes to the literature on majority voting over fiscal policies. We depart from the standard model in two dimensions. First, besides redistributing income, the government uses the net tax revenue to finance the provision of goods and services that become in-kind transfers to the citizens. By deciding on the composition of this expenditure (education, health, law-and-order, etc.), the government chooses the allocation of the benefits to the different income segments. This choice is a fundamental ingredient of fiscal policy. Second, we tackle the problem of choosing the income tax function and the composition of public expenditure by assuming that the political process selects one of these issues as the salient one. Political controversy and vote focus on this issue exclusively. The other dimension is determined in a way so as to minimize objections (obtain consensus) among the voters. We analyze the case where the salient policy is the composition of public expenditure. We show that for each voted expenditure policy, there is a unique income tax function that attains consensus. The political process we model yields that the progressiveness of the income tax schedule depends on income inequality interacted with the elasticity of substitution of the goods provided in the market and those publicly provided. This relationship is confirmed in our empirical test. ; Peer reviewed

Publicado como: Barcelona GSE Working Paper, nº 743, November 2013 Presentada conferencia en: Facultat d'Economia i Empresa, Universitat Rovira Virgili, Reus (Tarragona), el 4 de marzo de 2014 ; We model the political process as consisting of voting on the issue considered salient, public expenditure, with a subsequent consensus over size of government and income taxation. We prove that for each majoritarian choice there is a unique consensus policy on progressivity and government size. We empirically validate the implication that the sign of the relationship between inequality and progressivity chosen by the median voter is conditional on the degree of substitutability between government and market supplied goods. We also obtain that this substitutability has a negative impact on the negative marginal effect of inequality on the size of government ; Esteban and Mayoral research has been funded by the Generalitat de Catalunya and the CICYT (ECO2011-25293) ; Peer Reviewed

In this paper we study a behavioral model of conflict that provides a basis for choosing certain indices of dispersion as indicators for conflict. We show that a suitable monotone transform of the equilibrium level of conflict can be proxied by a linear function of the Gini coefficient, the Herfindahl-Hirschman fractionalization index, and a specific measure of polarization due to Esteban and Ray. (JEL D31, D63, D74)

In this paper we examine the link between ethnic and religious polariza- tion and conflict using interpersonal distances for ethnic and religious attitudes obtained from the World Values Survey. We use the Duclos et al (2004) polar- ization index. We measure conflict by means on an index of social unrest, as well as by the standard conflict onset or incidence based on a threshold number of deaths. Our results show that taking distances into account significantly improves the quality of the fit. Our measure of polarization outperforms the measure used by Montalvo and Reynal-Querol (2005) and the fractionalization index. We also obtain that both ethnic and religious polarization are significant in explaining conflict. The results improve when we use an indicator of social unrest as the dependent variable. ; Financial support from the Axa Research Fund, the Government of Catalonia, and the CICYT project n. SEJ2006-00369. Financial support from the CICYT project n. SEJ2006-00369. ; Peer reviewed

JEL classification: H23; H50 ; We introduce a model of redistributive income taxation and public expenditure. This joint treatment permits analyzing the interdependencies between the two policies: one cannot be chosen independently of the other. Empirical evidence reveals that partisan confrontation essentially falls on expenditure policies rather than on income taxation. We examine the case in which the expenditure policy (or the size of government) is chosen by majority voting and income taxation is consistently adjusted. This adjustment consists of designing the income tax schedule that, given the expenditure policy, achieves consensus among the population. The model determines the consensus in- come tax schedule, the composition of public expenditure and the size of government. The main results are that inequality is negatively related to the size of government and to the pro-rich bias in public expenditure, and positively or negatively related to the marginal income tax, depending on substitutability between government supplied and market goods. These implications are validated using OECD data. ; Generalitat de Catalunya and the CICYT (SEJ2006-00369) and from the Instituto de Estudios Fiscales. ; Peer reviewed

22 pages, 5 figures.-- JEL Classification Numbers: D74, D31.-- An earlier version of this paper was presented at the Yale Workshop on Conflict and Rationality (2008).-- Trabajo publicado como artículo en American Economic Review 101(4): 1345-1374 (2011).-- http://dx.doi.org/10.1257/aer.101.4.1345 ; In this paper we study a behavioral model of conflict that provides a basis for choosing certain indices of dispersion as indicators for conflict. We show that the (equilibrium) level of conflict can be expressed as an (approximate) linear function of the Gini coefficient, the Herfindahl-Hirschman fractionalization index, and a specific measure of polarization due to Esteban and Ray. ; Joan Esteban is a member of the Barcelona GSE Research Network funded by the Government of Catalonia. He gratefully acknowledges financial support from the AXA Research Fund and from the Spanish Government CICYT project n. SEJ2006-00369. Debraj Ray's research is supported by the National Science Foundation. ; Peer reviewed

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)

This article provides a theoretical framework that distinguishes between the occurrence of conflict and its severity, and clarifies the role of polarization and fractionalization in each of these cases. The analysis helps in ordering the various definitions, and in providing explanations for the empirical observations on the relationship between conflict, on the one hand, and polarization or fractionalization, on the other. The behaviour of players in conflict is described as a game, and equilibrium payoffs to all players are computed. The status quo is characterized by a set of political institutions that channel the different opposing interests and turn them into a collective decision, with a second set of payoffs. Groups rebel against the status quo political institution whenever the latter set of payoffs is dominated by the former. When society is highly polarized, the potential cost of rebellion is extremely high, and this cost may serve as the guarantor of peace. So, in highly polarized societies, the occurrence of open conflict should be rare but its intensity very severe, whenever it happens. On the other hand, highly fractionalized societies are prone to the occurrence of conflict, but its intensity will be moderate. It matters, therefore, whether one studies the intensity of conflict, conditional on conflict breaking out, or the likelihood that conflict actually occurs. Specifically, it is shown that: (i) measures of fractionalization and polarization tend to run in opposite directions, (ii) the onset of conflict critically depends on the political system in place, (iii) the occurrence of conflict and the intensity of conflict also tend to move in opposite directions, (iv) the relationship between polarization or fractionalization and conflict is non-monotonic and (v) the intensity of conflict depends positively on the degree of polarization.

32 pages.-- JEL-Classification: D70, D72, D74. ; We extend the model of collective action in which groups compete for a budged by endogenizing the group platform, namely the specific mixture of public/private good and the distribution of the private good to group members which can be uniform or performance-based. While the group-optimal platform contains a degree of publicness that increases in group size and divides the private benefits uniformly, a success-maximizing leader uses incentives and distorts the platform towards more private benefits - a distortion that increases with group size. In both settings we obtain the anti-Olson type result that win probability increases with group size. ; This paper is part of the Polarization and Con ict Project CIT-2-CT-2004-506084 funded by the European Commission-DG Research Sixth Framework Programme. J.E. is member of the Barcelona GSE Research Network funded by the Government of Catalonia. Financial support from the CICYT project n. SEJ2006-00369. E.H. acknowledges financial support from the CICYT project n. SEJ2006-01717 and the support of the Barcelona GSE Research Network and the government of Catalonia. ; Peer reviewed

Trabajo publicado como artículo en Journal of the European Economic Association 9(3): 496-521 (2011).-- http://dx.doi.org/10.1111/j.1542-4774.2010.01016.x ; We present a model of conflict, in which discriminatory government policy or social intolerance is responsive to various forms of ethnic activism, including violence. It is this perceived responsiveness -captured by the probability that the government gives in and accepts a proponed change in ethnic policy- that induces individuals to mobilize in support for their cause. Yet, mobilization is costly and demonstrators have to be compensated accordingly. Individuals have to weigh their ethnic radicalism with their material well-being to determine the size of their money contribution to the cause. Our main results are: (i) a one-sided increase in radicalism or in population size increases conflict; (ii) a one-sided increase in income has ambiguous effects depending on the elasticity of contributions to income; (iii) an increase in within-group inequality increases conflict; and (iv) an increase in the correlation between ethnic radicalism and inequality also increases conflict. ; Esteban is a member of Barcelona Economics and is grateful for support from the Generalitat de Catalunya and the CICYT (SEC-2003-1961). This research is part of the Polarization and Conflict research project CIT2-CT-2004-506084 funded by the European Commission-DG Research Sixth Framework Programme