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Resource Curse in Reverse: The Coffee Crisis and Armed Conflict in Colombia

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  • Oeindrila Dube

    ()
    (Kennedy School of Government, Harvard Uinversity)

  • Juan F. Vargas

    ()
    (Department of Economics, Royal Holloway, University of London and IQSS, Harvard University.)

Abstract

Between 1998 and 2003 production increases in Brazil and Vietnam drove down the price of coffee by 73 percent in global markets, triggering the "international coffee crisis". We examine the effect of this exogenous price fall on Colombia's civil war, exploring whether politically-motivated violencee presented different dynamics in the coffee-growing regions relative to the non-coffee regions, during the pre-crisis and crisis periods. Using a difference-in-difference framework, we find causal evidnece that the steep decline in coffee prices substantially increased both the incidence and intensity of Colombia's civil war. We also propose a simple model linking the price shock to violence and empirically examine the relative importance of three potential mechanisms. While crop substitution from coffee to coca explains very little of the variation, a disproportionate increase in poverty in coffee areas is associated with greater violence, as is a lower index of institutional development.

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Bibliographic Info

Paper provided by Department of Economics, Royal Holloway University of London in its series Royal Holloway, University of London: Discussion Papers in Economics with number 06/05.

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Date of creation: Dec 2006
Date of revision: Dec 2006
Handle: RePEc:hol:holodi:0605

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Keywords: Colombia; Civil War; Coffee Crisis; Difference-in-Differences;

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  1. Sachs, Jeffrey D. & Warner, Andrew M., 1999. "The big push, natural resource booms and growth," Journal of Development Economics, Elsevier, vol. 59(1), pages 43-76, June.
  2. Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-73, October.
  3. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2002. "Institutions and the resource curse," Development and Comp Systems 0210003, EconWPA.
  4. Robinson, James A & Torvik, Ragnar & Verdier, Thierry, 2002. "Political Foundations of the Resource Curse," CEPR Discussion Papers 3422, C.E.P.R. Discussion Papers.
  5. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  6. Paul Collier & Anke Hoeffler, 2004. "Greed and Grievance in Civil War," Development and Comp Systems 0409007, EconWPA.
  7. Deininger, Klaus, 2003. "Causes and consequences of civil strife - micro-level evidence from Uganda," Policy Research Working Paper Series 3045, The World Bank.
  8. Sachs, J-D & Warner, A-M, 1995. "Natural Resource Abundance and Economic Growth," Papers 517a, Harvard - Institute for International Development.
  9. Daniele Giovannucci & José Leibovich & Diego Pizano & Banco Mundial, 2002. "Colombia Coffee Sector Study," DOCUMENTOS CEDE 002135, UNIVERSIDAD DE LOS ANDES-CEDE.
  10. Angrist, Joshua & Kugler, Adriana D., 2005. "Rural Windfall or a New Resource Curse? Coca, Income and Civil Conflict in Colombia," CEPR Discussion Papers 5324, C.E.P.R. Discussion Papers.
  11. Barron, Patrick & Kaiser, Kai & Pradhan, Menno, 2004. "Local conflict in Indonesia : Measuring incidence and identifying patterns," Policy Research Working Paper Series 3384, The World Bank.
  12. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September.
  13. Do, Quy-Toan & Iyer, Lakshmi, 2007. "Poverty, social divisions, and conflict in Nepal," Policy Research Working Paper Series 4228, The World Bank.
  14. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 725-753, August.
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Cited by:
  1. Ahmed Mahmud & Juan Vargas, 2011. "Combatant recruitment and the outcome of war," Economics of Governance, Springer, vol. 12(1), pages 51-74, March.
  2. Rettberg, Angelika & Leiteritz, Ralf & Nasi, Carlo, 2010. "Entrepreneurial Activity and Civil War in Colombia: Exploring the Mutual Determinants between Armed Conflict and the Private Sector," Working Paper Series UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  3. Patricia Justino, 2012. "Shared Societies and Armed Conflict: Costs, Inequality and the Benefits of Peace," HiCN Working Papers 125, Households in Conflict Network.
  4. Hvid, Anna Kirstine & Henningsen, Geraldine Adrienne, 2014. "A new scramble for land or an unprecedented opportunity for the rural poor? Distributional consequences of increasing land rents in developing countries," MPRA Paper 52919, University Library of Munich, Germany.
  5. Hernando Zuleta & Juanita Villaveces, 2008. "Conflict and negotiation: a game theoretical approach," DOCUMENTOS DE TRABAJO 005148, UNIVERSIDAD DEL ROSARIO.
  6. Steven Poelhekke & Frederick van der Ploeg, 2010. "Do Natural Resources Attract FDI? Evidence from non-stationary sector level data," DNB Working Papers 266, Netherlands Central Bank, Research Department.

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