Stimulant or Depressant?: Resource-Related Income Shocks and Conflict

Household in Conflict (HiCN) Working Paper No. 286

110 Pages Posted: 16 Aug 2018 Last revised: 21 Mar 2019

See all articles by Kai Gehring

Kai Gehring

University of Zurich - Chair of Political Economy; Heidelberg University

Sarah Langlotz

Heidelberg University

Kienberger Stefan

Salzburg University

Date Written: November 30, 2018

Abstract

We provide evidence about the mechanisms linking resource-related income shocks to conflict. To do so, we combine temporal variation in international drug prices with new data on spatial variation in opium suitability. We find a conflict-reducing effect of higher drug prices over the 2002-2014 period, both in a reduced-form setting and using instrumental variables. There are two main mechanisms. First, we highlight the role of opportunity costs by showing that opium profitability positively affects household living standards. Second, by using data on the drug production process, ethnic homelands, and Taliban versus pro-government influence, we show that, on average, opportunity cost effects dominate contest effects. Contest effects depend on the degree of group competition over valuable resources. The conflict-reducing effect of higher prices is higher in areas that are more plausibly dominated by one group.

Keywords: Resources, Resource Curse, Conflict, Drugs, Illicit Economy, Illegality, Geography of Conflict, Afghanistan, Taliban

JEL Classification: D74, K4, O53, Q1

Suggested Citation

Gehring, Kai and Langlotz, Sarah and Stefan, Kienberger, Stimulant or Depressant?: Resource-Related Income Shocks and Conflict (November 30, 2018). Household in Conflict (HiCN) Working Paper No. 286. Available at SSRN: https://ssrn.com/abstract=3224444

Kai Gehring (Contact Author)

University of Zurich - Chair of Political Economy ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland
+4917620916056 (Phone)

HOME PAGE: http://www.kai-gehring.net

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

Sarah Langlotz

Heidelberg University ( email )

Grabengasse 1
Heidelberg, 69117
Germany

Kienberger Stefan

Salzburg University ( email )

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