International Relative Prices and Civil Wars in Sub-Saharan Africa. Theory and Evidence over the period (1995-2006)

Caruso, Raul (2011): International Relative Prices and Civil Wars in Sub-Saharan Africa. Theory and Evidence over the period (1995-2006).

Abstract

This paper presents first a theoretical model of conflict between two agents characterized by a two-sector economy. In a contested sector two agents struggle to appropriate the maximum possible fraction of a contestable output. In an uncontested sector, they hold secure property rights over the production of some goods. Agents split their resource endowment between ‘butter’, ‘guns’ and ‘ice-cream’. Eventually, tradable goods made of butter and ice-cream produced by conflicting parties are both sold to the Rest of the world. Therefore, the opportunity cost of conflict depends also on relative profitability of contested and uncontested production. In particular, productivity of uncontested production and profitability of contested sectors are countervailing forces. The empirical section focused on a panel of Sub-Saharan African countries for the period 1995-2006. Results are not fully conclusive. However, there is robust evidence that prices of manufactures (interpreted as the uncontested ice-cream) are negatively associated with the likelihood of a civil war. Eventually, international price of manufactures is also associated with a higher GDP per capita growth rate. The concluding remark seems to be that an increase in world prices of manufactures would make civil wars less likely.

• Item Type: MPRA Paper
• Language: English
• Keywords: Theoretical model of conflict, Civil war, resource curse, butter guns and ice-cream, structure of the economy, commodity prices, MUV, panel probit analysis
• Subjects: D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O19 - International Linkages to Development ; Role of International Organizations; C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C33 - Panel Data Models ; Spatio-temporal Models

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