Natural Resources, Social Conflict, and Poverty Trap

Abstract

The paper analyses a model where the fight for the appropriation of rents from natural resources between two groups leads to multiple equilibria. The possibility to be trapped into the low-income equilibrium, characterized by strong social conflict (civil war) and stagnation of income, increases with the weakness of political institutions, the population growth rate, the amount of rents from natural resources and the rate of depletion of natural resources and decreases with the level of per capita income, the investment rate and the length of life expectancy of individuals. The size of minority has an ambiguous effect, widening the range of income leading to low-income equilibrium, but also raising incentives to reach an agreement, i.e. a social contract, without any social conflict. Empirical evidence appears to support these findings.