LIT5: Dube, O. & Vargas, J. F. (2013). Commodity Price Shocks and Civil Conflict: Evidence from Colombia. Review of Economic Studies

Question 1

What is the relationship between income and conflict?

Answer 1

On the one hand, a rise in income may reduce conflict by increasing wages and
reducing labour supplied to criminal or conflict activity. (Opportunity Cost Effect)

On the other hand, more income means there is more to fight over. Conflict is increased by raising the return to predation and promoting rapacity over these resources. (Rapacity)

Question 2

What kind of income schocks reduce and increase conflict?

Answer 2

We find that the price of agricultural commodities (which are labour intensive) are negatively related to conflict.

In contrast, the price of natural resources (which use labour less intensively) are positively related to conflict

Question 3

What is the Rapacity effect?

Answer 3

Any shock which raises the return to appropriation will increase conflict by increasing labour supplied to the conflict sector.