I begin the book by providing an overview of recent political economy literature on ethnicity, which largely assumes that ethnicity is fixed and unchanging despite decades of evidence to the contrary. I then introduce my argument as an attempt to explain ethnic change. I first argue that people hold multiple ethnic identities simultaneously, and that individuals emphasize the one that brings them the most benefits. I then build upon earlier theories from Marx and Gellner to claim that industrialization is the most powerful factor that leads people to re-identify with larger ethnic groups, and that this process of assimilation is induced by the decline in the relative value of land. Inasmuch as the process of industrialization is inherently uneven, however, I suggest that assimliation should proceed unevenly as well. Finally I claim that the major role played by states in my theory is in their ability to promote or inhibit industrialization, not through assimilationist policies. I then go on to establish the scope conditions of my argument, namely the way I focus on ethnic change in non-violent contexts while also limiting myself to non-immigrant communities.