Local Competition Amplifies the Corrosive Effects of Inequality

Inequality is widely believed to incite conflict, but the evidence is inconsistent. We argue that the spatial scale of competition—the extent to which individuals compete locally, with their interaction partners, or globally, with the entire population—can help settle the question. We built a mathematical model of the evolution of conflict under inequality and tested its predictions in an experimental game with 1,205 participants. We found that inequality increases conflict, destroys wealth, and engenders risk taking. Crucially, these effects are amplified by local competition. Thus, inequality is at its most damaging when it arises between close competitors. Indeed, at the extremes, the combined effects of inequality and the scale of competition are very large. More broadly, our findings suggest that disagreements in the literature may be the result of a mismatch between the scale at which inequality is measured and the scale at which conflict occurs.