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Economic shocks and civil conflict. -- based on “Transitory Economic Shocks and Civil Conflict” by Ciccone -- “Democracy, Growth, and Civil War” by Brückner&Ciccone. This presentation and the literature. aim to contribute to literature on economic shocks and civil conflict specifically:. - PowerPoint PPT Presentation
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Economic shocks and civil conflict
-- based on “Transitory Economic Shocks and Civil Conflict” by Ciccone-- “Democracy, Growth, and Civil War” by Brückner&Ciccone
This presentation and the literature
• aim to contribute to literature on economic shocks and civil conflict
• specifically:(1) rainfall shocks and civil conflict/war in Sub-Saharan Africa?
(2) commodity price shocks and civil conflict/war in SSA?
(1) Rainfall shocks and civil conflict/war
• Existing evidence: (rainfall growth) conflict/war onset and incidence (see Miguel et al “Economic Shocks and Civil Conflict: An Instrumental-Variables Approach,” JPE 2004)
• Result: (low growth)(high conflict probability)
But rainfall shocks are transitory and low rainfall growth may therefore be due to:-- negative rainfall shock-- mean reversion after positive rainfall shock
Transitory positive shock at t=1(e.g. rainfall shock)
time0 1 2 3 4
negative growth
conflict onset?
YES…but then conflict may follow positive, not negative shocks!
Civil conflict onset and transitory shocks
Level specification
Probability(Onsetct)=act+b*logRainfallct+c*logRainfallct-1
Growth specification
Probability(Onsetct)=act+b*(logRainfallct-logRainfallct-1)
caution: rainfall growth may be low because of a negative rainfall shock or mean-reversion following a positive rainfall shock
Latest PRIO conflict data
• (i) same period as before (1981-1999)• (ii) longest possible period (1981-2006)
Civil war?
No reduced form effect of rainfall shocks on civil war onset
Instrumental variables approach
• Use rainfall as instrument for deviation of income per capita from trend
(First stage)
(Second stage)
(2) Commodity prices and civil conflict/war?
• The timing of civil wars in Uganda, Rwanda, and Burundi appear to be related to fall in price of coffee, their biggest export
• Is there evidence of a more generalized link between commodity export prices and civil conflict/war?
• Can commodity price fluctuations be used to estimate the effects of economic growth shocks on civil conflict/war?
Permanent positive shock at t=1(e.g. natural resource prices)
time0 1 2 3 4
Civil conflict onset and permanent shocks
Level specification
Probability(Onsetct)=act+b*logPricect+c*logPricect-1
Growth specification
Probability(Onsetct)=act+b*(logPricect-logPricect-1)
caution: price series may be non-stationary
International Commodity Price Index
AGRICULTURAL COMMODITIES: bananas, cocoa, coffee, cotton, fish, groundnuts, livestock, sugar, tea, tobacco, wood.
NATURAL RESOURCES: aluminium, copper, gold, iron, nickel, oil, phosphates, uranium.
Sources: Deaton, 1999 JEP, UN ComTrade, IMF
(3-year average)
Instrumental variables approach
• Use commodity price growth as instrument for economic growth
(3-year average)
(First stage)
(Second stage)
Civil conflict?
No reduced form effect of commodity prices shocks on civil conflict onset
Robustness
• excluding large commodity suppliers (more than 3% of world supply)
• agricultural vis-à-vis natural resource commodities
Heterogenous effects
• high versus low initial income• democracies versus autocracies
(Reduced form)
(Reduced form)
11
(F&PF versus NF)
(Reduced form)
12
Conclusions
Civil war
Civil conflictTransitory negative
shocks (rainfall)
Permanent negative shocks
(commodity prices)
(First stage)
Supplementary Table