Stimulant or Depressant? Resource-Related Income Shocks and Conflict

Abstract

We provide new evidence about the mechanisms linking resource-related income shocks to conflict. To do so, we combine temporal variation in international drug prices with new data on spatial variation in opium suitability to examine the effect of opium profitability on conflict in Afghanistan. District level results indicate a conflict-reducing effect over the 2002-2014 period, both in a reducedform setting and with three different instrumental variables. We provide evidence for two main mechanisms. First, the importance of contest effects depends on the degree of violent group competition over valuable resources. By using data on the drug production process, ethnic homelands, and Taliban versus pro-government influence, we show that on average group competition for suitable districts is relatively low in Afghanistan. Second, we highlight the role of opportunity costs by showing that opium profitability positively affects household living standards, and becomes more important after a sudden rise in unemployment due to the dissolution of large armed militias after an exogenous policy change.

Armed groups: Competition and political violence

“…Conceptually, we highlight that the proliferation of actors has an independent effect on political violence, even if local determinants of conflict, such as opportunity cost (Dube and Vargas, 2013) or state capacity (Fearon and Laitin, 2003;Dube and Naidu, 2015) remain constant. We also provide evidence that group proliferation seems not to affect infighting between groups in settings where group finances do not depend on the extraction of natural resources (as in Morelli and Rohner, 2015;Adhvaryu et al, 2018;Gehring et al, 2019), but mostly on local contributions (Limodio, 2022). On the econometric side, we show that group proliferation is a potential omitted variable in many studies and cannot be captured by fixed effects in monadic settings.…”

Armed Groups: Competition and Political Violence 1

“…Conceptually, we highlight that the proliferation of actors has an independent effect on political violence, even if local determinants of conflict, such as opportunity cost (Dube and Vargas, 2013) or state capacity (Fearon and Laitin, 2003;Dube and Naidu, 2015) remain constant. We also provide evidence that group proliferation seems not to affect infighting between groups in settings where group finances do not depend on the extraction of natural resources (as in Morelli and Rohner, 2015;Adhvaryu et al, 2018;Gehring et al, 2019), but mostly on local contributions (Limodio, 2022). On the econometric side, we show that group proliferation is a potential omitted variable in many studies and cannot be captured by fixed effects in monadic settings.…”

Insuring Peace: Index-Based Livestock Insurance, Droughts, and Conflict

“…Second, our results highlight that targeted -and potentially subsidized -index-based insurance has the potential to weaken the link between weather shocks and conflict, even in fragile conflict-prone settings. This contributes to a large literature linking economic shocks, resources, and conflict (e.g., Morelli and Rohner, 2015;Dube and Vargas, 2013;Berman and Couttenier, 2015;Bazzi and Blattman, 2014;Berman et al, 2017;McGuirk and Burke, 2020;Gehring et al, 2023;Hodler et al, 2023). Land is a key resource, especially if there are competing claims for land use.…”