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Commodity Price Shocks and Civil Conflict: Evidence from Colombia

Wednesday, January 28, 2009 - 12:00pm to 1:00pm

Center for Global Development presents a brown bag seminar on
Commodity Price Shocks and Civil Conflict: Evidence from Colombia 

Oeindrila Dube 
Harvard University 

Oeindrila is a Ph.D. candidate at Harvard University. 

Wednesday, January 28, 2009 
Please bring your lunch--drinks provided 

Center for Global Development 
1800 Massachusetts Avenue, NW, Third Floor, Washington, DC

Paper abstract: How do income shocks affect armed conflict? Theory suggests two opposite effects. If labor is used to appropriate resources violently, higher wages may lower conflict by reducing labor supplied to appropriation. This is the opportunity cost effect. Alternatively, a rise in contestable income may increase violence by raising gains from appropriation. This is the rapacity effect. Our paper exploits exogenous price shocks in international commodity markets and a rich dataset on civil war in Colombia to assess how different income shocks affect conflict. We examine changes in the price of agricultural goods (which are labor intensive) and natural resources (which are capital intensive). We focus on coffee and oil, the two largest exports. We find that a sharp fall in coffee prices in the 1990s increased violence differentially in regions growing more coffee, by lowering wages and the opportunity cost of joining armed groups. In contrast, a rise in oil prices increased violence differentially in the oil region, by increasing municipal revenue siphoned through rapacity. This pattern of results holds in several other agricultural and natural resource sectors, providing robust evidence that price shocks affect conflict in opposite directions depending on the factor intensity of the commodity.

Download Commodity Price Shocks and Civil Conflict: Evidence from Colombia (pdf, 2M)

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