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

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Author Info
Michael McBride () (Department of Economics, University of California-Irvine)
Stergios Skaperdas () (Department of Economics, University of California-Irvine)

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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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Publisher Info
Paper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 050606.

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Length: 23 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:irv:wpaper:050606

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Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
O10 - Economic Development, Technological Change, and Growth - - Economic Development - - - General

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Stergios Skaperdas, 2007. "An Economic Approach to Analyzing Civil War," Working Papers 060715, University of California-Irvine, Department of Economics. [Downloadable!]
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  2. Helmut Bester & Kai A. Konrad, 2003. "Easy Targets and the Timing of Conflict," cege – Center for European, Governance and Economic Development Research Discussion Papers 21, cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany).. [Downloadable!]
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  3. 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. [Downloadable!] (restricted)
  4. 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, Blackwell Publishing, vol. 60(3), pages 543-73, July. [Downloadable!] (restricted)
  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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  6. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  7. Gradstein, Mark, 2004. "Governance and growth," Journal of Development Economics, Elsevier, vol. 73(2), pages 505-518, April. [Downloadable!] (restricted)
  8. Daron Acemoglu & James A. Robinson, 2000. "Why Did The West Extend The Franchise? Democracy, Inequality, And Growth In Historical Perspective," The Quarterly Journal of Economics, MIT Press, vol. 115(4), pages 1167-1199, November. [Downloadable!] (restricted)
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  9. Gradstein, Mark, 2002. "Governance and Growth," CEPR Discussion Papers 3270, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  10. Harris, Christopher & Vickers, John, 1987. "Racing with Uncertainty," Review of Economic Studies, Blackwell Publishing, vol. 54(1), pages 1-21, January. [Downloadable!] (restricted)
  11. Bester, Helmut & Konrad, Kai A., 2004. "Delay in contests," European Economic Review, Elsevier, vol. 48(5), pages 1169-1178, October. [Downloadable!] (restricted)
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  12. Mehlum, Halvor & Moene, Karl, 2005. "Fighting against the odds," Memorandum 03/2005, Oslo University, Department of Economics. [Downloadable!]
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  13. Gregory D. Hess, 2003. "The Economic Welfare Cost of Conflict: An Empirical Assessment," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  14. Genicot, C. & Skaperdas, S., 2000. "Investing in Confict Management," Papers 00-01-17, California Irvine - School of Social Sciences.
  15. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June. [Downloadable!]
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  16. 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. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stergios Skaperdas, 2008. "An economic approach to analyzing civil wars," Economics of Governance, Springer, vol. 9(1), pages 25-44, January. [Downloadable!] (restricted)
    Other versions:
  2. Stergios Skaperdas, 2006. "Bargaining Versus Fighting," Working Papers 060705, University of California-Irvine, Department of Economics. [Downloadable!]
    Other versions:
  3. Michelle R. Garfinkel & Stergios Skaperdas, 2006. "Economics of Conflict: An Overview," Working Papers 050623, University of California-Irvine, Department of Economics, revised Sep 2006. [Downloadable!]
    Other versions:
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