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EITM Lecture – PART 1 July 8, 2011 Prof. Oeindrila Dube

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

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EITM Lecture – PART 1 July 8, 2011 Prof. Oeindrila Dube

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  1. 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

  2. Outline • Introduction • The economic causes of conflict • Income and conflict • Aid and conflict • The economic consequences of conflict

  3. 1. Introduction:Why should we think about the relationship between economic development and civil war?

  4. State-Based Armed Conflicts by Type, 1946-2006 2007 Human Security Report brief

  5. Two facts on civil wars Claimed more than 10.1 million lives between 1946-2005 More than 1/3rd of the developing nations affected

  6. Loss of LifeWorld map, scaled to war deaths in 2002 http://www.worldmapper.org/display.php?selected=288

  7. 2. The Economic Causes of Conflict

  8. Income shocks and conflict

  9. 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?

  10. Reverse Causality Poverty; low income Civil War

  11. Omitted Variable Bias Weak states, low governance capacity, bad institutions/leaders Poverty Civil War

  12. 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

  13. First-stage relationship contingent on time periodMiguel 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

  14. 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?

  15. 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

  16. Heterogeneous effect based on institutionsBesley and Persson, 2010

  17. Commodity Price Shocks and Civil Conflict: Evidence from Colombia Dube and Vargas (2010)

  18. 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

  19. Difference-in-differences empirical strategy • Compare changes in violence • Over time as price changes • Across regions that produce coffee/oil more intensively

  20. International price of coffee

  21. Coffee price fall increased conflict more in coffee region

  22. International price of oil

  23. Oil price rise increased conflictmore in oil region

  24. Coffee prices: opportunity cost mechanism More conflict in coffee-regions Opportunity cost of fighting falls Price of Coffee falls Farmers wages falls

  25. Evidence of wage mechanism

  26. Oil prices: predation mechanism More conflict in oil regions More revenue in oil regions Armed groups fight to steal revenue Price of oil rises

  27. Evidence of predation mechanism

  28. Future work shoulddisentangle 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

  29. 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

  30. 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

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