--- - |2 Abstract Research on the effects of ethnic politics abounds, but much less attention has been paid to where and why ethnic parties form. This article tests the explanatory power of rational‐choice and social‐movement informed approaches to ethnic party formation that, it argues, differ in their assumptions about the location of agency (elite vs. grassroots) and motives for party formation (office‐ vs. policy‐seeking). The assumptions are tested through an analysis of original data on party registration and socio‐economic factors in 327 Bolivian municipalities during the 2004 local elections. The elections took place under new electoral rules during a period of political restructuring, allowing an analysis of party entry decisions per se. Through a series of logistic regression models and various robustness checks, this article finds that social‐movement approaches are better able to explain ethnic party formation, and in particular that grievances over political maladministration and socio‐economic inequalities drive ethnic party formation. - 'Nations and Nationalism, Volume 24, Issue 4, Page 1162-1184, October 2018. '