Journal of Peace Research

47(5) 589600
Economic growth and ethnic violence: An The Author(s) 2010
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empirical investigation of HinduMuslim DOI: 10.1177/0022343310373032
jpr.sagepub.com
riots in India

Anjali Thomas Bohlken

University of British Columbia
Ernest John Sergenti
The World Bank*

Abstract
Most studies of HinduMuslim riots in India have tended to emphasize the effects of social, cultural, or political factors on the
occurrence of ethnic violence. In this article, the authors focus on the relationship between economic conditions and riots. Specif-
ically, this article examines the effect of economic growth on the outbreak of HinduMuslim riots in 15 Indian states between 1982
and 1995. Controlling for other factors, the authors find that just a 1% increase in the growth rate decreases the expected number of
riots by over 5%. While short-term changes in growth influence the occurrence of riots, this study finds no evidence of a relation-
ship between the levels of wealth in a state and the incidence of ethnic riots. Moreover, by including state fixed effects, the authors
determine that the negative relationship found between economic growth and riots is driven primarily by the relationship between
growth and riots within a state over time rather than across states. These results are robust to controlling for a number of other factors
such as economic inequality, demographic variables, political competition, temporal lags, spillover effects from adjacent states, and
year effects. Finally, to address potential concerns that economic growth could be a consequence rather than a cause of violence or
that other unobserved factors could confound the relationship between economic growth and the occurrence of HinduMuslim
riots, the authors also employ instrumental variables (IV) estimation, using percentage change in rainfall as an instrument for
growth. The results with IV estimation are similar to the results with non-IV estimation in terms of sign and significance, indicating
that the negative effect of economic growth on riots is not due to reverse causality or omitted variables bias.

Keywords
economic growth, ethnic conflict, ethnic politics, instrumental variables, party competition

Introduction ethnic groups to engage in violence. Examining the effect of

HinduMuslim riots in India have caused immense
human suffering. Based on figures collected by Varshney &
Wilkinson (2004), more than 7,000 individuals were killed
in riots in India between 1950 and 1995, including more than
4,600 killed during the period between 1982 and 1995 alone.
In addition to these large human costs, riots also lead to the
destruction of physical property and the disruption of eco-
nomic activity. While several recent works on the occurrence
of riots in India (e.g. Brass, 1997, 2003; Varshney, 2002;
Wilkinson, 2004) have emphasized social, cultural, and polit-
ical explanations, we focus on examining the link between
economic growth and riots within India.
Several competing theories have been formulated to explain
how economic growth might influence the propensity of
economic conditions on violence more broadly, Gurr (1970)
and Gurr & Duval (1973) posit an inverse relationship
between economic growth and violence, arguing that periods
of short-term declines in economic conditions lead to more
violence. By contrast, Olzak (1992) argues that periods of eco-
nomic growth could increase ethnic violence. Building on
resource mobilization theory (McCarthy & Zald, 1977) and
Corresponding author:
anjalitb@gmail.com
* This articles findings, interpretations, and conclusions are entirely those of
the authors and do not necessarily represent the views of the World Bank, its
Executive Directors, or the countries they represent.
590
focusing on the competition between groups, Olzak (1992:
12) notes that as fortunes for the disadvantaged rise, they
come to compete with those just above them, igniting ethnic
conflict and protest on the part of those on the next rung.1
Several other scholars have argued that economic growth may
lead to greater instability and conflict (e.g. Huntington, 1968;
Ake, 1974; Harms & Zink, 2005). Although these scholars
focus on the effects of long-term economic change, or moder-
nization, rather than on short-term economic fluctuations, as
we do in this article, their arguments suggest that economic
growth may lead to an increase in violence. Finally, some argue
that economic conditions appear to have no effect on ethnic
violence at all. For example, Horowitz (2001: 561) reports
that: we have witnessed deadly riots in countries experiencing
good times and witnessed quiescence in bad times.
Does economic growth have an effect on ethnic violence?
And, if so, is this effect beneficial or adverse? The primary goal
of this article is to answer these questions in the context of
HinduMuslim riots in India. Our main hypothesis which
we develop more fully below is that increases in economic
growth should lead to decreases in the occurrence of violence.
We test this hypothesis empirically controlling for other factors
such as economic inequality, demographic variables, and polit-
ical competition, which have been shown by others to influence
the occurrence of riots. In addition, we include temporal lags, a
measure of the influence of the riots occurring in adjacent states,
and state and year fixed effects. We find, even after controlling
for all of these factors, that periods of higher growth are indeed
negatively correlated with ethnic riots.
A central problem when estimating the effect of economic
growth on the occurrence of violence, however, is the issue of
reverse causality (see e.g. Miguel, Satyanath & Sergenti, 2004).
It is well known that riots in cities often result in the shutting
down of businesses, which directly affects economic productiv-
ity. Moreover, violence can deter investment and can also result
in the destruction of physical property. Hence, even in situations
where violence and economic conditions covary, violence could
be a cause rather than a consequence of worsening economic con-
ditions. With respect to omitted variables, several factors that lead
to greater violence could also lead to slower economic growth.
For example, a decline in civic associations could cause both an
increase in violence, as suggested by Varshney (2002), and a slow-
down in economic growth due to a decline in social capital.
Therefore, in the analysis that follows, we also estimate the effect
of economic growth on riots by instrumental variables. We use
annual percentage change in rainfall as an exogenous predictor
of economic growth. By employing instrumental variables, we
show not only that there is an association between economic con-
ditions and ethnic riots, but also that that relationship is unlikely
to be driven by reverse causality or omitted variables.
1
In her analysis, Olzak posits also that declines in economic conditions could
lead to increases in ethnic violence through the effect that economic scarcity
has on competition between ethnic groups.
journal of PEACE RESEARCH 47(5)
We conduct our analysis through a rigorous quantitative
examination of data from 15 Indian states from 1982 to
1995.2 Our main empirical result is the following. We find
robust evidence of a strong negative link between growth rates
and riots. Specifically, starting from any initial value of growth,
a 1% increase in the growth rate decreases the average number
of riots by over 5%. We find that, while growth explains a large
proportion of the intertemporal variation in riots, it is not the case
that states with higher average growth rates experience fewer
riots. We also find no evidence that states with higher GDP per
capita levels experience fewer riots. Finally, when we estimate our
model by instrumental variables (IV) to account for the possibil-
ity that growth may be endogenous, the effect of growth on riots
continues to be negative and statistically significant. With IV esti-
mation, we find that a 1% increase in the growth rate is associated
with a 10% drop in the average number of riots, double the effect
we find with non-IV estimation.
The main contributions of this study are as follows. First, to
our knowledge, we are the first to demonstrate in a rigorous
manner that economic growth does indeed have a negative
effect on the occurrence of riots. Second, through the use of
rainfall variation as an instrument for economic growth, we
show that the effect of growth on riots is not due to omitted
variables bias or reverse causality.
Third, our study also speaks to two important literatures on
violence. First, this article makes a contribution to the existing
literature which seeks to explain the occurrence of Hindu
Muslim violence in India. Recent studies on this issue have
advanced three important arguments. Wilkinson (2004) empha-
sizes the electoral incentives of politicians at the state level. In a
given state, the more politicians rely on the votes of minority
groups, the more these leaders will pressure security and police
forces at the local district level to maintain order. Wilkinson
argues that in states with high party fractionalization three or
more parties competing politicians will have an incentive not
to alienate minority voters, either because they hope to win a
greater percentage of the minority vote or because they wish to
maintain good relations with minority-led parties as current or
future coalition partners or both. Brass (1997: 284), meanwhile,
posits the existence in some towns of an institutional riot
mechanism: a network of actors, groups, and connections
involving persons from different social categories whose effect
. . . is to keep a town or city in a permanent state of awareness
of HinduMuslim relationships. The existence of these
riot mechanisms in certain towns makes these towns more
2
Our analysis is restricted to the 19821995 period, owing to data
constraints. Our measure of riots comes from the Varshney & Wilkinson
(2004) database which ends in 1995, and good quality economic and
rainfall measures start only in 1980 and 1979 respectively. Nevertheless, as
we discuss more fully below, of the 46 years covered by the Varshney &
Wilkinson dataset, the last 14 years between 1982 and 1995 accounted for
more than half of the reported number of riots and more than 65% of the
reported killings. Hence, our analysis focuses on the period in which riots
were more frequent and more destructive.
Bohlken & Sergenti
riot-prone. Finally, Varshney (2002) argues that riots are less
likely in places where organized interethnic associations exist,
which can act to diffuse tensions between ethnic communities.
While the above scholars have emphasized political, social, and
cultural explanations for the occurrence of HinduMuslim vio-
lence, we investigate the economic causes of this violence and find
that economic growth can explain much of the intertemporal var-
iation in HinduMuslim violence.
Second, our findings are closely related to the finding in
the civil wars literature that economic growth reduces the
likelihood of civil war onsets (e.g. Collier & Hoeffler,
1998, 2004; Miguel, Satyanath & Sergenti, 2004). Our
analysis demonstrates that this result with respect to civil
wars can be extended to riots, which are typically far shorter
in duration, smaller in scope, and associated with a lower
intensity of violence. The dominant explanation for the link
between economic growth and civil war is that the opportu-
nity cost of participating in a civil war is lower during periods
of relatively slower growth. But, as Sambanis (2004) argues,
it is important to establish whether civil wars have different
causes from other forms of violence. Since riots have a much
shorter duration and typically involve less loss of life and injury,
the opportunity costs explanation, as well as the broader link,
need not hold. Below, in the Arguments and hypothesis section,
we posit several mechanisms by which economic growth may
increase the occurrence of riots, such as the effect growth has
on the incentives of political elites to promote ethnic divisions.
The rest of this article is organized as follows. First, we
situate our analysis in the Indian context, providing a brief
summary of the trajectory of HinduMuslim riots and eco-
nomic growth in India since independence. Next, we present
our arguments and hypotheses through which economic
growth may influence riots. Last, we present our bivariate anal-
ysis, negative binomial results, and IV results.
Riots and economic growth in India
HinduMuslim violence has plagued Indian society for
decades.3 Most egregious was the violence between Hindus
and Muslims that accompanied the partition of colonial India
into Pakistan and India immediately after independence in the
late 1940s. Focusing on the period after those years, between
1950 and 1995, Varshney & Wilkinson (2004) find that
1,186 separate riot episodes were reported, with 7,052 individ-
uals killed. The trend in riots was in decline during the 1950s,
slightly on the rise in the 1960s, and again in decline in the
1970s. Overall, for the period between 1950 and 1981, the
average total number of riots in India was 16 per year. This
contrasts sharply with the same measure for the period
between 1982 and 1995, when the number of riots reported
3
Note that our focus on riots between Hindus and Muslims should not obscure
the fact that interethnic violence in India has taken many forms. For example,
HinduSikh violence was prevalent after Indira Gandhis assassination in 1984,
and tensions along caste as well as linguistic lines have also sparked riots.
591
exploded, averaging more than 48 per year for India as a
whole. Moreover, during the same period, 674 riots were
reported with 4,687 individuals killed more than half the
reported riots and more than 65% of the total individuals
killed during a period that was less than one-third as long as
the total period for which we have data.
There is widespread agreement that riots in India are very
rarely the result of a spontaneous outbreak of discontent.
Rather most riots are planned events, orchestrated more often
than not by political elites who recruit ordinary citizens as
participants and volunteers to incite and perpetuate violence
(see Brass, 1997, 2003; Wilkinson, 2004). A key example is the
movement for the construction of a Hindu temple at Ayodhya
to replace a mosque, led by the Vishva Hindu Parishad (VHP).
During this period, the Bharatiya Janata Party (BJP) led a large-
scale mobilization effort, which increased tensions between
Hindus and Muslims over the Ayodhya issue and led to a spurt
of HinduMuslim riots throughout the country in 19911992.
While the instigation of HinduMuslim riots is often associated
with politicians of the BJP and the militant organizations from
whom they derive support, the Congress party has also used this
tactic as a mobilization strategy. During the closing years of
Indira Gandhis rule in the early 1980s, the Congress party
changed its strategy from a broadly secular platform to a focus
on themes of Hindu hegemony designed to appeal to the
Hindi-speaking states in the North (see Hasan, 1990).
Turning next to economic growth, we note a similar pat-
tern to the one found with respect to riots, namely low growth
rates during the period from independence to around 1980
and much higher growth rates in the period after that. Between
1950 and 1980, the average growth rate for India as a whole was
a sluggish 1.7%, while between 1980 and 2000 the average rate
more than doubled to 3.8% (see Rodrik & Subramanian,
2004). While many observers have tended to believe that the
recent acceleration in Indias growth rate was a result of the
1991 liberalization undertaken by the Rao government, Rodrik
& Subramaniam (2004) and several others have found that a
structural break in the growth series occurred in the early 1980s.
Our analysis, which focuses on the time period between
1982 and 1995, thus examines a period in which there was
a surge in both the national-level growth rate and the incidence
of HinduMuslim violence. Although the long-term trend
appears to support the theory that higher growth rates lead
to more riots, careful analysis of the short-term, year-to-year
changes in growth rates demonstrates that indeed riots are less
frequent during periods of relatively higher economic growth.
In the next section, we present our argument and hypoth-
esis, and, in the subsequent section, we turn to a more detailed
analysis of these short-term variations for the period between
1982 and 1995.
Argument and hypothesis
Previous studies on the economic causes of violence have
suggested that economic growth could have a beneficial effect
592
(e.g. Gurr, 1970; Gurr & Duval, 1973; Olzak, 1992; Collier &
Hoeffler, 1998, 2004; and Miguel, Satyanath & Sergenti, 2004),
an adverse effect (e.g. Huntington, 1968; Ake, 1974; Olzak,
1992; and Harms & Zink, 2005), or no effect (e.g. Horowitz,
2001) on violence. We argue that there are three potential
mechanisms through which economic growth could influence
the occurrence of ethnic violence all of which suggest that
higher rates of growth should reduce the incidence of riots.
First, growth may influence the occurrence of riots through
the effect it has on electoral competition and the electoral
incentives of politicians (Horowitz, 1985; Wilkinson, 2004).
The slower the rate of economic growth, the more advanta-
geous it may become for certain incumbent politicians to stir
up ethnic sentiments in order to distract the attention of voters
away from declining economic conditions for which they
might be blamed and towards ethnic issues.4 This applies to
politicians for whom it would be advantageous to split the
electorate on an ethnic basis. These politicians may also
encourage their supporters to blame the other ethnic commu-
nity for their economic woes, thereby increasing animosity
between the two communities which could lead to violence.
Wilkinson (2004: 23) notes that an effective method for
elite-dominated ethnic parties to mobilize those target voters
who are at risk of voting for the main rival parties is to employ
ethnic wedge issues that increase the salience of ethnic issues
that will favor their party. In periods of slower economic
growth, when promises to provide economic benefits to target
voters may not seem credible and when the politician wishes to
deflect blame for relatively poor economic conditions, this strat-
egy may work particularly well. Moreover, Hasan (1984: 78)
notes that communalism has served a pernicious function by
diverting attention from the economic crisis and the breakdown
of the political system; instead, people tend to blame the other
community for their troubles. For example, militant communal
groups who were often allied with incumbent governments have
employed rhetoric that explicitly blames Muslims for the coun-
trys economic woes.5
Second, the effect of economic growth may work through
the mechanism of greater ethnic competition (Olzak, 1992).
As economic conditions worsen, competition between ethnic
groups may increase, leading to increased tensions and perhaps
violence. There are a number of examples cited by scholars in
4
It may also be electorally advantageous for non-incumbents to begin riots.
They may have an additional incentive to do so during periods of slower
growth as it should be easier to recruit participants during these periods.
5
Along the same lines as the above argument, Esteban & Ray (2008a) have
constructed a model to demonstrate that in situations where the incentives
for the poor to incite class conflict increase, the rich prefer ethnic conflict
rather than class conflict. This is because an overt redistributive conflict is
more costly to the rich than a conflict along ethnic lines, in which the rich
supply the resources and the poor supply the labor. For elite dominated
parties, if the incentives for class conflict intensify during periods of slower
economic growth, the Esteban & Ray model could help explain why
political elites in India may have had an incentive to instigate Hindu
Muslim riots.
journal of PEACE RESEARCH 47(5)
which riots were used as an excuse to drive out economic
competitors. In the case of Jabalpur, competition in the
cigarette industry, over which Muslims largely had control,
intensified violence there (Engineer, 1984), while, in Aligarh,
Hindu businessmen precipitated riots in order to try to force
the Muslims to leave and sell their houses at low cost in order
to grab their property holdings (Brass, 2003).
A third possible mechanism through which economic
growth could decrease the number of riots is that, as in the case
of civil wars, the opportunity cost of engaging in a riot may be
lower during periods of relatively slower growth. Such periods
may be associated with, on average, fewer job opportunities,
lower wages and/or lower profits for an ordinary citizen.
In terms of foregone wages, therefore, the costs of participating
in a riot may also be lower, while the benefits from looting
and/or monetary compensation for participating may appear
more attractive (Cameron & Parikh, 2000; DiPasquale &
Glaeser, 1998). In addition to affecting ordinary Indians, peri-
ods of relatively slow growth would make it easier for certain
political and economic elites to recruit agents, who could then
be used to foment riots.
While we do not have the data required to distinguish
between the alternate mechanisms, each of the mechanisms sug-
gests that the effect of economic growth on ethnic violence
should be negative in the Indian context. Note that the first
mechanism in which slower economic growth leads to
increased incentives for political elites to stir up ethnic sentiments
is conditional on the fact that the political environment makes
it advantageous to split the electorate along ethnic lines. With the
increase in electoral competition in India at the state and national
level since the early 1980s, we believe that this condition is satis-
fied during the period under study. The other two mechanisms
also rely on the assumption that there are pre-existing divisions
between the ethnic communities engaging in riots which are
intensified during periods of slower economic growth. Given the
long history of HinduMuslim conflict in India, we believe that
this condition is satisfied in the context we are studying.
Lastly, although some arguments made in existing studies
on violence could imply that the effect of economic growth
on violence could be positive (e.g. Huntington, 1968; Ake,
1974; Harms & Zink, 2005), we do not think that these argu-
ments have much power in explaining short-term variations in
HinduMuslim violence in India. For example, Huntingtons
(1968) argument that modernization leads to political disorder
examines the effect that industrialization and the radical social
changes that accompanied it had on political order. It is by
design an analysis that looks at long-term changes and not at
the short-term changes that we examine in this article. Harms
& Zink (2005) is another study which posits a positive rela-
tionship between economic growth and violence. The authors
argue that economic growth can lead an economy to a phase
where redistribution opens up investment opportunities,
which leads to conflicts over redistribution and increases the
likelihood of violence. Again, the focus is on long-term struc-
tural changes and not on short-term fluctuations.
Bohlken & Sergenti 593

Table I. Descriptive statistics (19821995)

Mean Median Std dev Min Max

Panel A: Number of riots

Number of riots 3.05 1 5.94 0 41
Number of riots, t1 3.12 1 5.95 0 41
Log (0.1 Number of riots) .359 1 .095 2.30 3.71
Log (0.1 Number of riots), t1 .314 1 .095 2.30 3.71
Number of riots in adjacent states 11.46 6 14.07 0 84
Panel B: Economic growth
Growth 3.10 2.38 7.27 18.6 38.3
Growth, t 1 3.18 2.46 7.35 18.6 38.3
Panel C: Control variables
Effective number of parties 4.34 3.89 1.85 2.63 13.21
Coalition government 0.25 0 0.44 0 1
Urban inequality 33.20 33.30 3.50 23.50 47.96
Log (Population) 10.70 10.74 0.57 9.49 11.93
Percent Muslim 11.64 8.91 8.10 1.18 28.43
Percent Muslim squared 200.69 79.4 241.09 1.39 808.26
Percent literate 54.35 55.8 12.85 38.50 89.80
GDP per capita, 1980 1,617 1,498 4,84.9 917 2,674
Panel D: Rainfall
% Change in rainfall 2.47 0.77 26.3 47.0 187.3
% Change in rainfall, t 1 2.41 0.77 26.1 47.0 187.3

Number of observations is 206 for all measures.

Our main hypothesis concerning the effect of short-term
economic fluctuations on ethnic violence is as follows:
Hypothesis: In situations where the political environment
makes it advantageous to split the electorate along ethnic lines
or in situations where there are pre-existing divisions between
two ethnic groups, or both: lower rates of economic growth
should lead to an increase in the occurrence of ethnic violence.
We now move to an empirical analysis of economic growth and
riots. In the next section, we describe the data we use to test this
hypothesis.
Descriptive statistics and bivariate plots
Our dependent variable that we use throughout the analysis
Number of riots measures the number of reported Hindu
Muslim riots in a given state-year.6 These data come from
Varshney & Wilkinson (2004). Our independent variable of
interest Growth is the annual growth rate of GDP per
6
One possible objection to our findings concerns the level of analysis we
employ. Due to a lack of available data, we cannot examine town-level varia-
tion in growth and riots. This is important because it has been argued in
previous studies (e.g. Varshney, 2002) that the mechanisms related to the
initiation of riots operate at this level. Nevertheless, we believe that state-
level measures of economic growth serve as good proxies for town-level con-
ditions. Although slower economic growth at the aggregate level in a state
could be driven by declining productivity in certain specific sectors, evidence
from previous studies shows the existence of significant spillovers across the
rural-urban sectors in India (see e.g. Ravallion & Datt, 1996).
capita in a state. GDP per capita data by Indian state come
from the Government of India, Ministry of Statistics and
Programme Implementation (MOSPI), and are in constant
base 198081 prices.7
The sample of state-years that we examine consists of
15 Indian states observed for most states over 14 years, from
1982 to 1995, for a total of 206 observations.8 In Table I, we
present summary statistics for this sample for all the variables that
we employ in the analysis. The mean Number of riots is 3.05
per state-year with a large standard deviation of roughly 6.
As is the case with other datasets of violent events, our sample
consists of many state-year observations where no riot events
occurred, close to 45% of the observations. Hence, the distribu-
tion of the riots measure is skewed strongly to the right. Regard-
ing Growth, from Table I, we see that the median growth rate is
2.38%. Moreover, the variance in growth rates is quite high, with
a standard deviation of 7.26% and growth rates ranging from
18.6% to 38.3%.
In Table II, we present the cross-sectional variation of
riots and growth by state. We see that the state with the
highest mean number of HinduMuslim riots is Gujarat
with 13.71 and the state with the fewest is Punjab with 0.
With respect to growth rates, Gujarat had the highest rate
of growth at 4.71% and Bihar had the lowest at 0.63%.
It is clear that it is not the case, as we see with Gujarat, that
7
Refer to the MOSPI National Accounts Division website, http://
mospi.nic.in/national_account_main.htm.
8
For Haryana, we are missing data on inequality for the last four years of our
sample, from 1992 to 1995.
594 journal of PEACE RESEARCH 47(5)

Table II. List of states in the sample (sorted by the average number of riots)

State Total years Average no. of HinduMuslim riots Average growth rate (%)

1. Gujarat 14 13.71 4.71

2. Maharashtra 14 8.14 4.64
3. Uttar Pradesh 14 7.00 2.01
4. Karnataka 14 4.43 3.61
5. Bihar 14 2.71 0.63
6. Andhra Pradesh 14 2.07 3.31
7. West Bengal 14 1.43 3.39
8. Rajasthan 14 1.36 4.31
9. Madhya Pradesh 14 1.29 2.10
10. Tamil Nadu 14 0.93 4.22
11. Assam 14 0.71 0.96
12. Kerala 14 0.57 3.39
13. Orissa 14 0.43 2.22
14. Haryana 10 0.10 4.13
15. Punjab 14 0.00 3.11
TOTAL 206
We use the state definitions as they were before the divisions made in 2000.

states with higher average growth rates are characterized by Average for all states 19821995
lower mean Number of riots. Rather, for a given state, years 8 Riots 15
Growth
characterized by higher growth rates relative to the average
Number of reported riots

growth rate for that state, are characterized by fewer riots than 6

Growth rate (%)

years with relatively lower rates of growth. 10
We see this relative relationship clearly with the year-by-year
4
plots of Growth and Number of riots that we present in Figure 1.
First, looking at the pattern for the average of all states in India, 5
we see that the years in which the annual growth rates are among 2
the highest are also generally the years associated with the fewest
riot incidents. This pattern is essentially the same when we look 0 0
state by state. For example, with Gujarat, we see that Gujarat 1983 1985 1987 1989 1991 1993 1995
experienced riots in 1986 and 1987 (when the growth rates were Year
relatively low) and not in 1988 when the growth rate was rela-
tively high. Whats more, three out of the four years in which
Gujarat 19821995
Gujarat witnessed greater than 10% rates of growth were charac- 40 40
Riots
terized by no riots or very few riots. From these plots, it appears Growth
Number of reported riots

that the pace of economic growth explains much of the variation 30

in the occurrence of riots over time. 30 Growth rate (%)
20
20
10
Regression analysis
10 0
Next we turn to multiple regression analysis in order to control
for other covariates and confounding factors that may influ- 10
ence both growth and riots and thus affect the correlation 0
between these two variables. 1983 1985 1987 1989 1991 1993 1995
Year
In line with the argument in Wilkinson (2004), we include
the variable Effective number of parties in our regression analysis Figure 1. Growth rate and riots.
to operationalize the electoral incentives argument made by the
same author. According to Wilkinson (2004), the greater the & Nooruddin (2004). The existence of a coalition government
number of effective parties competing in a state, the more likely could also be a measure of the competitiveness of elections
it is that the Muslim vote is pivotal and the less likely it is that and could thus also provide a disincentive for politicians to
politicians might incite riots. Data on the effective number of start riots. We use the variable Coalition government, which
parties competing for office by Indian state are from Chhibber is equal to 1 if the state had a coalition government in that
Bohlken & Sergenti
year and 0 otherwise. This measure is taken from Chhibber
& Nooruddin (2004).
Demographic factors may also influence which towns or
states experience a riot. Spilerman (1970) argues in the context
of race riots in the USA that the likelihood of ethnic violence
may be a function of the number of individuals from the
national minority living in a given town or state. As the
percentage of the minority group increases, the likelihood of a
riot increases, but as this percentage continues to increase such
that the minority group becomes dominant, the likelihood of a
riot decreases. Riots are thus more likely when the majority and
minority groups are more evenly matched. Although, admit-
tedly, this argument can be better tested using town-level data,
in some specifications, we control for the demographic charac-
teristics of a state by including the variables Percentage Muslim
and Percentage Muslim squared. These data come from the Cen-
sus of India website.9 Censuses occur roughly every 10 years in
India. The data that we use are from the 1991 census and are
invariant throughout our sample.10
Inequality also could influence growth rates and affect the
number of riots. Data for our Urban inequality variable come
from two sources. Up to and including 1991, these data come
from STICERD at the London School of Economics, based
originally on data from the World Bank.11 Data for 1993 to
1997 come from Jha (2000). Data for 1992 were unavailable,
so we interpolate by taking the average of the 1991 and 1993
values. The level of wealth in a state could influence not just
democratic stability, the prevalence of civil war, or the occur-
rence of social unrest (e.g. Przeworski et al., 2000; Fearon &
Laitin, 2003; Harms & Zink, 2005), but could also affect the
occurrence of ethnic riots. To control for this possibility, we
include the variable GDP per capita, 1980, the level of GDP per
capita in a state at the beginning of the sample period. This vari-
able also serves as a measure of state capacity, which could influ-
ence both growth rates and the occurrence of violence (see
Fearon & Laitin, 2003). To account for the possibility that vio-
lence between groups is less likely in populations with higher
levels of socio-economic well-being, we also control for the level
of literacy in a state using the measure Percent literate. Our lit-
eracy data, which measure the percent of literate adults in a
state, come from the 1991 Census of India and are invariant.
9
Note that the focus of this analysis is HinduMuslim violence. Punjab
experienced large-scale HinduSikh violence during the period under study
which is not captured in our analysis.
10
In addition, Esteban & Ray (2008b) argue that more ethnically
fractionalized societies are more prone to the occurrence of low-intensity con-
flict. We tested this argument by running our analyses with a measure of eth-
nic fractionalization, Muslim_Frac the probability that a randomly drawn
Muslim is matched with a randomly drawn non-Muslim instead of the Per-
centage Muslim measures. Muslim_Frac did not attain conventional levels of
significance with any of our specifications (results not shown). More impor-
tant, our main substantive results regarding the effect of economic growth
on the number of riots remained the same.
11
Refer to http://sticerd.lse.ac.uk/.
595
We also control for a states population size by including
the variable Log (Population). This allows us to account for the
possibility that more populous states may be more likely to
experience riots. And in some specifications (not reported)
we also control for the land area of a state and a states popu-
lation density. Our state population and land area data come
from the STICERD set.
Next, in order to model the time dependence in the occur-
rence of riots, we include a lagged dependent variable Number
of riots, t1. This variable is included primarily for technical rea-
sons it is likely to remove serial correlation in our residuals
which allows us to satisfy the conditional independence assump-
tions required for our estimation procedures. However, this
variable could have a substantive interpretation as well. Riots
may also follow previous riots as each riot strengthens existing
fears and hatreds and creates new desires for revenge, leading
to a vicious cycle of continual rioting (Posen, 1993). The caveat,
however, is that the level of aggregation at which this variable is
measured may not be appropriate for testing this hypothesis
unless the riots tend to occur in the same towns within a state.
Finally, following Urdal (2008), we control for spatial
dependence in the form of conflict spillovers. We do so with
the variable, Number of riots in adjacent states, which counts
the total number of HinduMuslim riots that occurred in
adjacent states during the same year.
As our dependent variable is an integer count with high
variance and a high proportion of zeros, we start our regres-
sion analysis with a negative binomial model (Cameron and
Trivedi, 1998). Results from our base specification are
presented in Table III, Column 1. We note first that the
coefficient estimate on Growth is negative, .053, and is sta-
tistically significant at the 99% level. Hence, in line with
Gurr & Duval (1973), Collier & Hoeffler (1998, 2004), and
Miguel, Satyanath & Sergenti (2004), we find that growth
has a beneficial effect on violence. Setting all variables at their
median values, we find that a 1% increase in the rate of
growth decreases the average number of riots by 0.10. Given
the assumption that the expected number of riots follows an
exponential function, the marginal effect of growth will
reduce the expected average number of riots by more at lower
levels of initial growth than at higher levels, because at lower
levels of initial growth the average number of riots will be
higher than at higher levels. For example, for an initial level
of growth of 5%, the 10th percentile, a 1% increase in
growth will reduce the average number of riots by .15, while
for an initial level of growth of 10%, the 90th percentile, a
1% increase in growth will reduce the average number of
riots by .07 (see Figure 2). The median change (in absolute
value) of growth rates from one year to the next in our sam-
ple is 5.8%, which can produce a substantially large change in
the occurrence of riots. These results show that there is a
strong negative link between economic growth and the occur-
rence of riots during our sample period.
The only control variables that are significant at conven-
tional levels are the Number of riots, t1, Number of riots in
596 journal of PEACE RESEARCH 47(5)

Table III. Economic growth and riots

Dependent variable: Number of riots

Base With state fixed effects With state & year fixed effects
Explanatory variable (1) (2) (3)

Growth .053*** (.014) .049*** (.016) .051*** (.013)

Growth, t1 .012 (.017) .014 (.025) .023 (.019)
Effective number of parties .101 (.119) .156** (.068) .151*** (.056)
Coalition government .002 (.339) .365** (.177) .486*** (.183)
Urban inequality .021 (.033) .042 (.041) .013 (.025)
Number of riots, t1 .060*** (.017) .013* (.008) .013* (.008)
Number of riots in adjacent states .027*** (.006) .035*** (.006) .002 (.009)
Log (Population) .275 (.368) .771 (1.062) 2.79 (7.24)
Percent Muslim .453*** (.111)
Percent Muslim squared .014*** (.004)
Percent literate .012 (.024)
GDP per capita, 1980 .0004 (.0005)
State fixed effects No Yes Yes
Year fixed effects No No Yes
Log likelihood 377.99 343.17 312.66
Number of observations 206 192 192

Maximum likelihood estimation of a negative binomial model. Heteroskedastic-consistent standard errors clustered by state in parentheses. Effects are signif-
icantly different from zero at 90% (*), 95% (**), 99% (***) confidence. State and year fixed effects are included in specifications where indicated (coefficient
estimates not reported).

adjacent states, Percent Muslim, and Percent Muslim squared.
Hence, we find qualified support for both of the arguments that
previous violence begets current violence and that violence may
diffuse across state borders through contagion effects. These
results also indicate that riots are more likely when groups are
more evenly matched. With regard to the level of economic
development, we find that GDP per capita, 1980 was not signif-
icant at conventional levels. Hence, whereas growth appears to
have a negative effect on the occurrence of riots, it is not the case
that states with relatively higher levels of wealth at the beginning
of our sample period experienced fewer riots.
Next, to control for unobserved cross-sectional heterogene-
ity across states, we add state fixed effects to our base specifica-
tion. This specification allows us to examine the determinants
of the intertemporal variation in the occurrence of riots. This is
important because, while bivariate plots of the variation of
growth and riots over time in a state generally show a clear rela-
tionship between growth and riots, we do not observe this rela-
tionship in the cross-section. Instead, our results are driven by
the strong association between growth and riots that we
observe within a state over time.
By adding state fixed effects, our sample drops to 192 obser-
vations. We lose the 14 observations for Punjab state, as no inci-
dents of HinduMuslim riots were reported in this state during
our sample period,12 and thus a fixed effect for Punjab would
perfectly predict zero riots. In addition, several of our
12
There were, however, many instances of HinduSikh rioting which our
dependent variable does not measure.
explanatory variables that are time invariant Percent Muslim,
Percent literate, and GDP per capita, 1980 must be dropped
as well. Our results are presented in Table III, Column 2. The
coefficient estimate on Growth remains significant at the 99%
level and is in the expected direction. Whats more, the esti-
mate is quite similar to the estimate for the base specification.
This indicates that much of the effect of growth can be
attributed to its impact on the intertemporal variation in riots.
Regarding our control variables, the coefficient estimate on
the Effective number of parties is now statistically significant,
but it has changed direction from the base specification and
is now positive. Hence, the within-state intertemporal effect
of an increase in the number of parties is to increase the like-
lihood of ethnic conflict, which contradicts the electoral incen-
tives hypothesis. This change in sign implies that the
relationship between the effective number of parties and the
occurrence of riots within a state is substantively different from
the overall relationship between the two factors found with the
pooled sample. By contrast, the effect of Coalition government
is now significantly negative at the 95% level, indicating that
the presence of a coalition government may help in preventing
riots. The change in significance with the Effective number of
parties and Coalition government variables is in part due to the
reduction in the standard error of the estimate, indicating that
once we include state fixed effects, these variables explain a
large part of the residual variation in the occurrence of vio-
lence. The variables Number of riots, t1 and Number of riots
in adjacent states remain positive and significant.
Finally, to address concerns related to nationwide shocks,
such as the destruction of the mosque at Ayodhya in 1992,
Bohlken & Sergenti 597

Panel A. Expected number of riots

Expected number of riots

3

0
5 0 5 10 15
Growth rate (%)

Growth rate varies from 5% (the 10th percentile) to 15% (the 5th percentile) for the sample. Estimate and confidence
interval generated by simulation. The dash lines represent the 95% confidence bounds.

Panel B. Marginal effects

.1
Marginal effect

.2

.3

5 0 5 10 15
Growth rate (%)

Growth rate varies from 5% (the 10th percentile) to 15% (the 5th percentile) for the sample. Estimate and confidence
interval generated by simulation. The dash lines represent the 95% confidence bounds.

Figure 2. The effect of growth (negative binomial model).

we also add year fixed effects to our specification. As can be
seen from Table III, Column 3, the effect of Growth is sub-
stantively unchanged. The main substantive change of adding
year fixed effects is to negate the effect of the Number of riots in
adjacent states, suggesting that national shocks were more
important than any regional patterns.13
13
One potential issue with the results presented so far is that, for panel data, a
model that includes a lagged dependent variable in the presence of fixed effects
is inconsistent (see Greene, 2003). Our dataset, however, has more time
Endogeneity concerns
It is quite possible that our key explanatory variables
Growth and Growth, t1 are endogenous. First, riots can
periods than a typical panel and hence is more accurately defined as a time-
series cross-section (TSCS). Beck & Katz (2004) show that, for TSCS data
with large enough T, the bias resulting from including a lagged dependent
variable in a model with fixed effects, estimated with OLS, is small relative
to the costs (statistical and otherwise) associated with using other methods.
598 journal of PEACE RESEARCH 47(5)

Table IV. Instrumental variables estimation

Dependent variable: Log (0.1 Number of riots)

OLS base OLS state & year fixed effects IVbase IV state & year fixed effects
Explanatory variable (1) (2) (3) (4)

Growth .053** (.023) .050* (.027) .103** (.044) .107* (.052)

Growth, t1 .005 (.017) .017 (.024) .041 (.034) .039 (.039)
Effective number of parties .012 (.100) .173** (.063) .056 (.097) .171** (.058)
Coalition government .412 (.281) .251 (.246) .388 (.268) .222 (.235)
Urban inequality .006 (.033) .009 (.033) .013 (.038) .009 (.035)
Number of riots, t1 .276*** (.085) .094 (.093) .250** (.097) .090 (.099)
Number of riots in adjacent states .030*** (.007) .010 (.015) .027*** (.007) .010 (.017)
Log (Population) .347 (.412) 5.12 (7.25) .347 (.392) 7.99 (8.59)
Percent Muslim .319** (.119) .356*** (.118)
Percent Muslim squared .010** (.004) .011*** (.004)
Percent literate .010 (.016) .017 (.015)
GDP per capita, 1980 .001 (.0004) .001 (.0004)
State fixed effects No Yes No Yes
Year fixed effects No Yes No Yes
R2 0.47 0.65
Root MSE 1.41 1.21 1.45 1.26
Number of observations 192 206 192 206
Heteroskedastic-consistent standard errors clustered by state in parentheses. Coefficient estimates significantly different from zero at 90% (*), 95% (**), 99%
(***) confidence. State and year fixed effects are included in specifications where indicated (coefficient estimates not reported).

cause significant damage to physical property and thus lower
economic growth. According to one report, property damage
to both Hindu and Muslim businesses during the 1989 riots
in the city of Kota in Rajasthan was estimated to be well
over $1 million.14 Thus, endogeneity could result from the
fact that changes in economic growth in a state may be a
result rather than a cause of ethnic violence. Second, the
expectation of violence could deter investment, thereby lead-
ing to lower growth. Besley & Persson (2009) provide a
theoretical model in which conflict lowers incentives to
invest in fiscal capacity, which in turn could lower growth,
while Schneider (2008) shows that movements in the
Tel Aviv stock exchange predict the level of cooperation
between Israelis and Palestinians better than a nave autore-
gressive model. These results imply that investment decisions
are frequently made on the basis of expectations of conflict.
Third, changes in economic growth in a state may be corre-
lated with other omitted variables such as weak civic associa-
tions, which could not be included in our analysis due to a
lack of systematic data. Not taking the potential of reverse
causality and omitted variables into account could induce bias
in our estimate of the effect of economic growth on riots.
In order to deal with these potential problems, we estimate
our specifications using instrumental variables (IV) estimation.
Given that the properties of IV estimation are best understood
with the linear model, we modify our dependent variable by
taking the log of the original values as follows: Log (0.1
14
Riots between Hindus and Moslems touch off political alarm in India. The
Washington Post, 23 September 1989, p. A18.
Number of riots).15 This log-linear model serves as a good
approximation to the negative binomial model. Whereas, with
the negative binomial model, one assumes that the Number of
riots is a function of the exponential of the beta coefficients
multiplied by the covariates, yit e expXit b, with the log-
linear model, one assumes that the log of the Number of riots
is a function of the beta coefficients multiplied by the covari-
ates, log yit e Xit b.
In Table IV, Columns 1 and 2, we present results for the base
specification and for the specification with state and year fixed
effects using the log-linear model, estimated by ordinary least
squares (OLS). The coefficient estimates for Growth in both
specifications are similar to the ones estimated with the negative
binomial model, .053 to .053 and .049 to .050. We are
confident, therefore, that the log-linear model provides a good
linear approximation to the negative binomial model. We may
now proceed to an IV estimation of the log-linear model.16
Percentage change in rainfall is our instrument for Growth and
the Percentage change in rainfall, t1 for Growth, t1.17 Our
source for rainfall data is the Global Precipitation Climatology
15
The addition of 0.1 is needed to avoid taking the log of 0, which is
undefined.
16
In a previous version of this article, we also estimated our base specification
using a Generalized Method of Moments (GMM) estimator with a non-linear
model, developed by Blundell, Griffith & Windmeijer (2002). The results
obtained were substantively similar to those presented in Table IV, Column 3.
17
In Miguel, Satyanath & Sergenti (2004), the authors report that relative
change in rainfall was a robust predictor of growth only for sub-Saharan Africa.
We find, however, that when we analyze the variance across Indian states, the
relative change in rainfall is a robust predictor of growth.
Bohlken & Sergenti
Project (GPCP) database.18 To derive rainfall estimates, the
GPCP uses a combination of weather station rainfall gauge mea-
sures and satellite information on the density of cold cloud cover
(which is closely related to actual precipitation). The rest of the
control variables are instruments for themselves. We present
instrument diagnostics and a discussion of the exclusion restric-
tion for our instrument in the web appendix to this article.
In Table IV, Columns (3) and (4) we present results of IV
estimation of the log-linear model for both specifications. The
results are almost identical to those from OLS estimation of
each of the specifications, except for the effect of Growth on
the Number of riots. The coefficient estimates on this variable
have more than doubled, from .053 to .103 and from .050
to .107. Based on the IV specification, we find that a 1%
increase in the rate of growth decreases the average number
of riots by roughly 10% more than double the effect found
with non-IV estimation. The increase in magnitude of the esti-
mated effect may suggest that attenuation bias caused by mea-
surement error in the growth variable or omitted-variables bias
is a more important source of bias than reverse causality. Alter-
natively, the increase in magnitude may suggest that the results
of the IV estimation produce an estimate of the Local Average
Treatment Effect (LATE) which is different from the Average
Treatment Effect (ATE).19 Either way, the results of the IV
estimation provide evidence that the negative and statistically
significant relationship between growth and riots that we find
in our non-IV estimation is not driven by omitted variables or
reverse causality.
Conclusion
Exploiting the subnational variation, both across space and
time, within India in the occurrence of ethnic violence, we
have examined the effect of economic growth on ethnic vio-
lence. We find that short-term fluctuations in economic
growth explain a large portion of the intertemporal variation
in the occurrence of riots, and that growth has a statistically
and substantively significant negative effect on violence. Our
results are robust to controlling for a large number of factors
that have been posited by previous studies to affect the occur-
rence of violence, and are also robust to the inclusion of state
and year fixed effects. Moreover, using annual changes in rain-
fall as an instrument for economic growth, we are able to show
that our results are not driven by reverse causality or omitted
variables such as weakened civic associations or institutional
changes.
While there is clear evidence of a negative effect of eco-
nomic growth on violence, we find no support for the conven-
tional wisdom that higher levels of socio-economic well-being
either in the form of higher GDP per capita or higher literacy
rates reduce the occurrence of violence. In addition to
18
Refer to http://cics.umd.edu/*yin/GPCP/.
19
See Angrist (2004) for a discussion of Local Average Treatment Effects.
599
economic growth, our results demonstrate that demography,
the past incidence of violence, and riots in adjacent states are
important factors explaining the variation in violence.
We have posited three mechanisms through which
economic growth can influence the occurrence of ethnic vio-
lence: by leading governing elites to distract attention from
adverse conditions by fomenting a riot; by intensifying eco-
nomic competition between ethnic groups; or by reducing the
opportunity cost to potential participants. More systematic
research needs to be conducted to investigate whether any or
all of these mechanisms can explain the link between economic
growth and ethnic violence in India. By establishing that eco-
nomic growth reduces the occurrence of violence, this article
gives rise to new questions which offer promising avenues for
further research.
Data replication
The dataset, codebook, and command files for the empirical
analysis in this article can be found at http://www.prio.no/
jpr/datasets.
Acknowledgements
We would like to thank Kanchan Chandra, David Laitin,
Jeremy Weinstein, Steven Wilkinson, and the other participants
at the Laboratory in Comparative Ethnic Processes (LiCEP) 12
Conference, held at the University of California, San Diego, as
well as Neal Beck, William Greene, Irfan Nooruddin, Shanker
Satyanath, and two anonymous referees for very helpful com-
ments and suggestions. We also thank Tim Besley, Pradeep
Chhibber and Irfan Nooruddin, Raghabendra Jha, and
Ashutosh Varshney and Steven Wilkinson for sharing their data
with us.
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ANJALI THOMAS BOHLKEN, b. 1978, PhD in Political Sci-
ence (New York University, 2010); Assistant Professor, University
of British Columbia (July 2010 ); current main interests: political
economy of development, politics of South Asia, governance,
decentralization and local government, methods for causal infer-
ence. Recent article in Journal of Theoretical Politics.
ERNEST JOHN SERGENTI, b. 1970, PhD in Political Science
(New York University, 2010); Economist, The World Bank
(2010). Recent articles in Journal of Political Economy, American
Journal of Political Science, and Quarterly Journal of Political Science.