In ethnically diverse countries, negative economic shocks can increase competition for limited private and public resources and exacerbate conflict along inter-ethnic lines. Using variation in fertility rates induced by the Chinese lunar calendar, we document a 14-percent rise in births among ethnically Chinese Malaysians in dragon years, which are considered auspicious. Malays in turn reduce their fertility, and this reduction is greatest in majority Chinese areas. Moreover, we find that the Malay response was muted in areas where private as well as public resources were more abundant. These results reveal that households are forward-looking in their fertility decisions, and they indicate the role of governments to reduce ethnic tension through policies that increase public resources and household incomes.