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Stimulant or depressant? Resource-related income shocks and conflict

Author

Listed:
  • Kai Gehring

    (University of Zurich)

  • Sarah Langlotz

    (Heidelberg University)

  • Stefan Kienberger

    (University of Salzburg)

Abstract

We provide 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. We find a conflict-reducing effect of higher drug prices over the 2002-2014 period, both in a reduced-form setting and using instrumental variables. There are two main mechanisms. First, we highlight the role of opportunity costs by showing that opium profitability positively affects household living standards. Second, by using data on the drug production process, ethnic homelands, and Taliban versus pro-government influence, we show that, on average, opportunity cost effects dominate contest effects. Contest effects depend on the degree of group competition over valuable resources. The conflict-reducing effect of higher prices is higher in areas that are more plausibly dominated by one group.

Suggested Citation

  • Kai Gehring & Sarah Langlotz & Stefan Kienberger, 2018. "Stimulant or depressant? Resource-related income shocks and conflict," HiCN Working Papers 286, Households in Conflict Network, revised Apr 2020.
    • Handle: RePEc:hic:wpaper:286
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    References listed on IDEAS

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    Cited by:

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    2. Daniele, Gianmarco & Le Moglie, Marco & Masera, Federico, 2023. "Pains, guns and moves: The effect of the U.S. opioid epidemic on Mexican migration," Journal of Development Economics, Elsevier, vol. 160(C).

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    More about this item

    Keywords

    Resources; resource curse; conflict; drugs; illicit economy; illegality; geography of conflict; Afghanistan; Taliban;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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