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

University of Heidelberg Discussion Paper Series No. 652

114 Pages Posted: 16 Aug 2018

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: July 19, 2018

Abstract

We provide new 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 to examine the effect of opium profitability on conflict in Afghanistan. District level results indicate a conflict-reducing effect over the 2002-2014 period, both in a reduced- form setting and with three different instrumental variables. We provide evidence for two main mechanisms. First, the importance of contest effects depends on the degree of violent group competition over valuable resources. By using data on the drug production process, ethnic homelands, and Taliban versus pro-government influence, we show that on average group competition for suitable districts is relatively low in Afghanistan. Second, we highlight the role of opportunity costs by showing that opium profitability positively affects household living standards, and becomes more important after a sudden rise in unemployment due to the dissolution of large armed militias after an exogenous policy change.

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 (July 19, 2018). University of Heidelberg Discussion Paper Series No. 652. 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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