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We examine the effect of inter-group competition on within-group violent conflict in Indonesia.
Using a triple-differences design, we find that higher competition for national government
transfers between villages reduces within-village conflict. These effects persist regardless of the
competition鈥檚 outcome, are stronger in ethnically fractionalized and segregated villages, and are
accompanied by higher attendance in village meetings. Our results are consistent with external
competition favoring participation and cooperation within otherwise divided communities,
suggesting that economic incentives to compete with out-groups combined with forms of civic
engagement can be important mechanisms to reduce violence within communities.
