In-Group Cooperation in a Hostile Environment – An Economic Perspective on some Aspects of Jewish Life in (pre-modern) Diaspora

The demographic history of the Jews in the Middle Ages may be characterized by two main phenomena: i) a sharp drop in the number of Jews until the beginning of the modern period, due mainly to conversions; and, ii) early urbanization. Until now, these features have been analyzed as primarily resulting from persecution and restrictions initiated by the political and religious authorities in the host countries. Economic historians have recently proposed an explanation based on mandatory education in the Jewish tradition (Botticini and Eckstein, 2001). We propose a supplementary explanation based on the incentives to switch affiliation and/or location in a dual environment, where potential gains from in-group cooperation for the Jewish minority may well be offset by losses due to intergroup hostility. Our model generates the two results described above (i.e., a decrease in the total number of Jews, and their concentration in urban areas), without having to rely either on discrimination policies or on investment in human capital, as in previous research.