"I analyze theoretically and empirically the role played by grievances and hostile beliefs in ethnic conflicts. I study the interaction between economic incentives, endogenous salience of ethnic identities, belief dynamics and conflicts. In particular I analyze the formation of oppositional ethnic identities, which correspond to group-specific systems of beliefs leading to distrust and use of violence. Those issues are at the intersection of the literatures on the economics of conflicts and the economics of social identity. They involve both micro- and macro- aspects. I provide an applied theory framework to articulate the analysis and I perform both experimental and empirical investigations to test the main theoretical predictions.The project is ambitious but realistic. It has the potential for important contributions to the current literature: the topic is important, original and unexplored using formal and quantitative methods. My methodological approach encompasses state-of-the-art theory and thought-provocative empirical strategies. The approach is grounded in quantitative economics. However the proposal draws many insights from other disciplines in the social and biological sciences.This proposal is a revised version of my research project which was selected for the second step of the previous ERC 2011 call."