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Conflict diamonds

  • Olsson, Ola

’Conflict diamonds’ refers to the fatal role that diamonds are believed to have played in several African conflicts. The article analyzes the impact of diamond abundance on economic growth in light of the broader, previously discovered empirical finding of a ’curse of natural resources’. By extending the theory of appropriative conflict, a predator-prey game is outlined in which a rebel chooses between peaceful production and predation on natural resources controlled by the ruler. It is shown that whereas an increase in natural resources will increase the ruler’s public utility investments, it might also lead to a crowding-out of labor from the formal sector to the appropriative struggle, which depresses growth. As predicted by the model, a cross-country regression analysis suggests that diamond abundance has a negative relationship with economic growth in countries with weak institutions.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 82 (2007)
Issue (Month): 2 (March)
Pages: 267-286

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Handle: RePEc:eee:deveco:v:82:y:2007:i:2:p:267-286
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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