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Many governments around the world use irregular forces to help fight against insurgents. But what makes governments forgo the monopoly of violence and delegate part of the use of force to irregular armed groups within and outside or armed conflicts? We focus on pro-government militias (PGMs) that are primarily recruited along ethnic lines. Their recruitment is shaped by supply and demand. Supply is high if ethnicity is politically salient and can be used to mobilize militia members. Demand for ethnic-based militias is expected to be high if the government faces political dissent along an ethnic dimension. Under such conditions the goals of an ethnically recruited militia is likely to align with the goals of the government, reducing principal-agent problems. However, governments can also mobilize members of excluded ethnic groups into their militias to prevent them taking up arms against the leader. Employing new information on PGM membership, we empirically assess how demand and supply shape the onset of ethnically recruited pro-government militias. By identifying the ethnic group from which the militia members are drawn and information from the Ethnic Power Relations (EPR) dataset, we can test whether they come from a politically privileged or excluded ethnicity. This study provides new insights into the role of ethnicity in governments forgoing the monopoly of violence.