The Economic Causes and Consequences of
Conflict:
Where the literature stands and where we should go from here
EITM Lecture – PART 1
July 8, 2011
Prof. Oeindrila Dube
Outline
• Introduction
• The economic causes of conflict
– Income and conflict
– Aid and conflict
• The economic consequences of conflict
1. Introduction:
Why should we think about the relationship
between economic development and civil war?
State-Based Armed Conflicts by Type, 1946-2006
2007 Human Security Report brief
Two facts on civil wars
• Claimed more than 10.1 million lives between 1946-2005
• More than 1/3rd of the developing nations affected
Loss of Life
World map, scaled to war deaths in 2002
http://www.worldmapper.org/display.php?selected=288
2. The Economic Causes of Conflict
Income shocks and conflict
Per-capita income and conflict likelihood
• Several cross-country analyses have established a
negative correlation between GDP per capita and conflict
– Collier and Hoeffler (1998, 2001, 2002)
– Fearon and Laitin (2003)
• Challenges to identification?
Reverse Causality
Poverty;
low
income
Civil War
Omitted Variable Bias
Weak states, low
governance
capacity, bad
institutions/leaders
Poverty
Civil War
Economic Shocks and Civil Conflict
Miguel, Satyanath and Sergenti (2004)
• Do GDP growth shocks affect likelihood of conflict?
• Use rainfall shocks as an instrument for growth shocks
– Extreme rainfall (i.e., drought) harms agriculture
– Found negative growth shock reduced probability of conflict in
Sub-Saharan Africa, 1981-1999
• Requirements for a credible IV
– Exclusion restriction: no other channels through which
instrument affects dependent variable
– Instrument correlated with endogenous variable
First-stage relationship contingent on time period
Miguel and Satyanath (forthcoming)
• Rainfall shocks are not correlated with growth in SSA when
time period extended to 1981-2009
– Strong growth of non-agricultural sectors
• Rainfall is not a valid instrument for growth on conflict in
the post 1999 period
Taking stock
• No explicitly identified cross-country study shows a
significant negative effect of GDP on risk of conflict
– For the global sample
– For SSA over full sample period
• Doesn’t imply no relationship between income and conflict
– We lack an instrument that applies to global sample
– A more nuanced relationship between income and conflict?
Possible Nuances
• Heterogeneous treatment effects
– Economic shocks may only affect conflict for some countries and
not others
• Different types of economic shocks may affect conflict in
different directions
Heterogeneous effect based on institutions
Besley and Persson, 2010
Commodity Price Shocks and Civil Conflict:
Evidence from Colombia
Dube and Vargas (2010)
Overview
• Do different income shocks affect conflict differently?
• Within-country analysis of Colombia:
– Exploit exogenous international commodity price shocks to major
exports (coffee and oil)
– Exploits variation across regions in production of those exports
Difference-in-differences empirical strategy
• Compare changes in violence
– Over time as price changes
– Across regions that produce coffee/oil more intensively
International price of coffee
Coffee price fall increased conflict more
in coffee region
International price of oil
Oil price rise increased conflict
more in oil region
Coffee prices: opportunity cost mechanism
Price of
Coffee
falls
Farmers
wages falls
Opportunity
cost of
fighting falls
More
conflict in
coffeeregions
Evidence of wage mechanism
Oil prices: predation mechanism
Price of
oil rises
More
revenue in
oil regions
Armed groups
fight to steal
revenue
More
conflict in
oil regions
Evidence of predation mechanism
Future work should
disentangle resource curse mechanisms
• Does the resource act as a prize that groups fight over?
• Are resources used to finance conflict?
• Does the presence of resource extraction generate
grievances?
– Inequitable resource distribution
– Govt. provides fewer public goods
Ways forward on income and conflict
• Further work remains to be done in:
– Understanding the nature of the income-conflict relationship
– Providing evidence on channels
• Micro data presents more opportunities for:
– Looking at disaggregated shocks
– Testing mechanisms directly
Ways of getting micro-data on conflict
• Event-based data
• Dube and Vargas (newspaper and Catholic priest reports)
• ACLED for select countries : http://www.acleddata.com/
• Household surveys on retrospective conflict experience
• Bellows and Miguel, 2006
• Microcon: http://www.microconflict.eu/index.html
• Testimony from truth and reconciliation commissions
• Yanagiza, 2010; Leon, 2009
• Mortality statistics to look at homicides
• Angrist and Kugler, 2008; Dube, Dube and Garcia-Ponce, 2010