Marketization and the Prospect for Ethnic Conflict

• In Event: Ethnicity and Patterns of Violence

Abstract

Do free-market economic reforms affect the prospects for ethnic conflict? One of the most transformative politico-economic phenomena in the world in the past few decades has been the process of economic marketization. Yet, we know little about how marketization affects domestic political stability and the chances for ethnic conflict. Paris (2004) argues that political and economic liberalization is inherently tumultuous, and thereby undermines the prospects for stable peace. Walton and Seddon (1994) find a strong correlation between popular unrest and the promotion of free market policies in a number of developing countries in the 80s and 90s. Other scholars have argued the opposite, associating economic liberalization with increased efficiency and welfare, and therefore lower chances of civil conflicts (Steinberg and Saideman 2008).

Testing the relationship between market liberalization and ethnic violence is difficult because first, aggregated country-level analyses often have difficulties to reveal nuanced differences in the ways that various aspects of marketization affect a society. Second, democratization and marketization are often intertwined processes so that it is difficult to separate the effects. In this paper, we focus on Xinjiang, China because it provides a unique testing ground: the fact that China has engaged in substantial economic reform without substantial political reform allows us to examine effects of economic factors on violence while holding political factors constant. Our disaggregated approach – using county-year as the unit of analysis – allows us to better specify local precipitants of ethnic violence.

Theoretically, we expect that Xinjiang counties that are more affected by marketization experience higher levels of ethnic violence. The public sector has traditionally been an important source of employment for ethnic minorities in China. With the implementation of marketization policies, Xinjiang’s public employment sectors in urban areas shed 884,000 jobs between 1995 and 2002 alone (Hopper and Webber 2009). Though private sector employment has increased, ethnic minorities are disadvantaged to make the transition. They face employment discrimination in private job markets due to poorer education and limited Mandarin language skills (Zang 2011). They also lack access to credit and do not have a cultural tradition of entrepreneurship.

Empirically, we use a unique, county-level database of violent incidents – the Ethnic Violence in China (EVC) database (Cao et al. 2018) – updating its temporal coverage from 1990-2005 to include 2006-2015 – and various political, social, and economic indicators. We also take advantage of a unique data set, the Chinese Industrial Enterprise Surveys (1998-2013), to create measures of marketization by looking at the share of non-state (i.e., private, collectively owned, and foreign owned) enterprises in industrial output and employment at the county level. This database embodies information for ALL enterprises whose sale is above 5 million RMB annually: for example, there are 336, 768 enterprises included in 2007 alone. On average, the total production quantity of those enterprises accounts for 95% of Chinese industrial production quantity. Our preliminary analysis indeed suggests that market liberalization indeed increases the chances of ethnic violence.

Authors

• Chuyu Liu, Pennsylvania State University

• Xun Cao, Penn State University