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Explaining Conflict in Low-Income Countries: Incomplete Contracting in the Shadow of the Future

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  • Michael McBride
  • Stergios Skaperdas

Abstract

We examine two factors that help explain the prevalence of conflict in low-income countries: that adversaries cannot enforce long-term contracts in arms, and that open conflict alters the future strategic positions of the adversaries differently than does peace. Using an infinite horizon model, we show the conditions under which adversaries will not be able to sustain short-term contracts even though doing so is Pareto superior to open conflict. Conflict arises because adversaries attempt to gain future strategic supremacy that only victory in conflict brings. Lower incomes or wages, as well as higher discount factors and the less destructive conflict is, the higher is the likelihood of war.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2005/wp-cesifo-2005-12/cesifo1_wp1636.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1636.

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Date of creation: 2005
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Handle: RePEc:ces:ceswps:_1636

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  1. Bester, Helmut & Konrad, Kai A., 2004. "Delay in contests," European Economic Review, Elsevier, vol. 48(5), pages 1169-1178, October.
  2. Stergios Skaperdas, 2007. "An Economic Approach to Analyzing Civil War," Working Papers 060715, University of California-Irvine, Department of Economics.
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  4. Mehlum, Halvor & Moene, Karl, 2005. "Fighting against the odds," Memorandum 03/2005, Oslo University, Department of Economics.
  5. Garfinkel, M.R. & Skaperdas, S., 2000. "Conflict without Misperceptions or Incomplete Information: how the Future Matters," Papers 99-00-11, California Irvine - School of Social Sciences.
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  8. Gregory D. Hess, 2002. "The Economic Welfare Cost of Conflict: An Empirical Assessment," Claremont Colleges Working Papers 2002-08, Claremont Colleges.
  9. Skaperdas, Stergios & Syropoulos, Constantinos, 1996. "Can the shadow of the future harm cooperation?," Journal of Economic Behavior & Organization, Elsevier, vol. 29(3), pages 355-372, May.
  10. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June.
  11. Genicot, C. & Skaperdas, S., 2000. "Investing in Confict Management," Papers 00-01-17, California Irvine - School of Social Sciences.
  12. Budd, Christopher & Harris, Christopher & Vickers, John, 1993. "A Model of the Evolution of Duopoly: Does the Asymmetry between Firms Tend to Increase or Decrease?," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 543-73, July.
  13. Jack Hirshleifer, 1989. "Conflict and rent-seeking success functions: Ratio vs. difference models of relative success," Public Choice, Springer, vol. 63(2), pages 101-112, November.
  14. McBride, Michael, 2005. "Crises, reforms, and regime persistence in sub-Saharan Africa," European Journal of Political Economy, Elsevier, vol. 21(3), pages 688-707, September.
  15. Gradstein, Mark, 2004. "Governance and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 505-518, April.
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  17. Paul Collier & V. L. Elliott & Håvard Hegre & Anke Hoeffler & Marta Reynal-Querol & Nicholas Sambanis, 2003. "Breaking the Conflict Trap : Civil War and Development Policy," World Bank Publications, The World Bank, number 13938, January.
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Cited by:
  1. Christopher Blattman & Edward Miguel, 2010. "Civil War," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 3-57, March.
  2. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Working Papers 060705, University of California-Irvine, Department of Economics.
  3. Stergios Skaperdas, 2008. "An economic approach to analyzing civil wars," Economics of Governance, Springer, vol. 9(1), pages 25-44, January.
  4. Petros G. Sekeris, 2012. "The Tragedy of the Commons in a Violent World," Working Papers 1213, University of Namur, Department of Economics.
  5. Konrad, Kai A., 2007. "Strategy in contests: an introduction," Discussion Papers, Research Unit: Market Processes and Governance SP II 2007-01, Social Science Research Center Berlin (WZB).
  6. Beviá, Carmen & Corchón, Luis C., 2013. "Endogenous strength in conflicts," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 297-306.
  7. Christopher Blattman & Edward Miguel, 2009. "Civil War: A Review of Fifty Years of Research," Working Papers id:2231, eSocialSciences.
  8. Hoffmann, Magnus, 2007. "The Social Benefit of War," MPRA Paper 6196, University Library of Munich, Germany.
  9. Michael McBride & Gary Milante & Stergios Skaperdas, 2009. "Peace and War with Endogenous State Capacity," Working Papers 091002, University of California-Irvine, Department of Economics.
  10. Michael McBride & Stergios Skaperdas, 2009. "Conflict, Settlement, and the Shadow of the Future," Working Papers 080922, University of California-Irvine, Department of Economics.
  11. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier.

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