Economic Shocks and Conflict: Evidence from Commodity Prices
University of California, San Diego (UCSD)
University of Chicago, Harris School of Public Policy; National Bureau of Economic Research (NBER)
March 22, 2013
Higher national incomes are correlated with lower political instability. We test three theories linking income to conflict using a new database of export price shocks. Price shocks have no effect on new conflicts, even large shocks in high-risk nations. Rising prices, however, lead to shorter, less intense wars. This evidence contradicts the theory that rising state revenues incentivize attempts at capture, but accords with two theories: that rising revenues improve state counter-insurgency capacity and reduce individual incentives to fight in existing conflicts. Conflict onset and continuation follow different processes. Ignoring this time dependence generates mistaken conclusions about income and instability.
Number of Pages in PDF File: 51
Keywords: income shocks, political instability, fragile states
Date posted: May 23, 2013