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War Signals: A Theory of Trade, Trust, and Conflict

Author

Listed:
  • Dominic Rohner
  • Mathias Thoenig
  • Fabrizio Zilibotti

Abstract

We construct a theory of persistent civil conflicts, where persistence is driven by the endogenous dynamics of inter-ethnic trust and trade. In times of peace, agents belonging to two groups are randomly matched to trade bilaterally. Trade hinges on trust and cooperation. The onset of conflict signals that the aggressor has a low propensity to cooperate, harming future trust and trade. Agents observe the history of conflicts and update their beliefs over time. The theory predicts that civil wars are persistent. Moreover, even accidental conflicts that do not reflect economic fundamentals erode trust, and can plunge a society into a vicious cycle of recurrent conflicts (a war trap). The incidence of conflict can be reduced by policies abating cultural barriers, fostering inter-ethnic trade and human capital, and shifting beliefs. Coercive peace policies, such as peacekeeping forces or externally imposed regime changes, have no enduring effects. Copyright 2013, Oxford University Press.

Suggested Citation

  • Dominic Rohner & Mathias Thoenig & Fabrizio Zilibotti, 2013. "War Signals: A Theory of Trade, Trust, and Conflict," Review of Economic Studies, Oxford University Press, vol. 80(3), pages 1114-1147.
  • Handle: RePEc:oup:restud:v:80:y:2013:i:3:p:1114-1147
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    File URL: http://hdl.handle.net/10.1093/restud/rdt003
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Facciamo i conti
      by Alberto Bagnai in Goofynomics on 2014-02-25 06:03:00

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    Cited by:

    1. Jonas Hjort, 2013. "Ethnic Divisions and Production in Firms," CESifo Working Paper Series 4449, CESifo Group Munich.
    2. Stefano Costalli & Luigi Moretti & Costantino Pischedda, 2017. "The economic costs of civil war," Journal of Peace Research, Peace Research Institute Oslo, vol. 54(1), pages 80-98, January.
    3. Francesco Caselli & Massimo Morelli & Dominic Rohner, 2015. "The Geography of Interstate Resource Wars," The Quarterly Journal of Economics, Oxford University Press, vol. 130(1), pages 267-315.
    4. Couttenier, Mathieu & Preotu, Veronica & Rohner, Dominic & Thoenig, Mathias, 2016. "The Violent Legacy of Victimization: Post-Conflict Evidence on Asylum Seekers, Crimes and Public Policy in Switzerland," CEPR Discussion Papers 11079, C.E.P.R. Discussion Papers.
    5. Mueller, Hannes & Rohner, Dominic & Sch�nholzer, David, 2017. "The Peace Dividend of Distance: Violence as Interaction Across Space," CEPR Discussion Papers 11897, C.E.P.R. Discussion Papers.
    6. Cornelius Christian & James Fenske, 2015. "Economic shocks and unrest in French West Africa," CSAE Working Paper Series 2015-01, Centre for the Study of African Economies, University of Oxford.
    7. Bluhm, Richard & Gassebner, Martin & Langlotz, Sarah & Schaudt, Paul, 2016. "Fueling conflict? : (De)escalation and bilateral aid," MERIT Working Papers 053, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    8. Dominic Rohner & Mathias Thoenig & Fabrizio Zilibotti, 2013. "Seeds of distrust: conflict in Uganda," Journal of Economic Growth, Springer, vol. 18(3), pages 217-252, September.
    9. Daron Acemoglu & Alexander Wolitzky, 2012. "Cycles of Distrust: An Economic Model," Levine's Working Paper Archive 786969000000000502, David K. Levine.
    10. Yikai Wang & Simon Alder, 2017. "Divide and Rule: An Origin of Polarization and Ethnic Conflict," 2017 Meeting Papers 1242, Society for Economic Dynamics.
    11. Alessandra Cassar & Pauline Grosjean & Sam Whitt, 2013. "Legacies of violence: trust and market development," Journal of Economic Growth, Springer, vol. 18(3), pages 285-318, September.
    12. Xin, Guangyi, 2017. "Trust and Economic Performance: A Panel Study," MPRA Paper 80815, University Library of Munich, Germany.
    13. repec:ebd:wpaper:159 is not listed on IDEAS
    14. Ola Olsson, 2016. "Climate Change and Market Collapse: A Model Applied to Darfur," Games, MDPI, Open Access Journal, vol. 7(1), pages 1-27, March.
    15. Erik O. Kimbrough & Kevin Laughren & Roman Sheremeta, 2017. "War and Conflict in Economics: Theories, Applications, and Recent Trends," Discussion Papers dp17-10, Department of Economics, Simon Fraser University.
    16. Algan, Yann & Cahuc, Pierre, 2014. "Trust, Growth, and Well-Being: New Evidence and Policy Implications," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 2, pages 49-120 Elsevier.
    17. Doepke, Matthias & Zilibotti, Fabrizio, 2014. "Culture, Entrepreneurship, and Growth," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 0, pages 1-48 Elsevier.
    18. Yann Algan & Pierre Cahuc, 2014. "Trust, Well-Being and Growth: New Evidence and Policy Implications," Post-Print hal-01169659, HAL.
    19. Morelli, Massimo & Rohner, Dominic, 2015. "Resource concentration and civil wars," Journal of Development Economics, Elsevier, vol. 117(C), pages 32-47.
    20. Fenske, James & Kala, Namrata, 2017. "1807: Economic shocks, conflict and the slave trade," Journal of Development Economics, Elsevier, pages 66-76.
    21. Francesco Caselli, 2012. "The Geography of Inter-State Resource Wars," 2012 Meeting Papers 1174, Society for Economic Dynamics.
    22. Gunes Gokmen, 2012. "Economic Clash? The Role of Cultural Cleavages in Bilateral Trade Relations," EcoMod2012 4252, EcoMod.
    23. repec:gam:jgames:v:7:y:2016:i:1:p:9:d:66071 is not listed on IDEAS
    24. Achyuta Adhvaryu & James Fenske, 2013. "War, resilience and political engagement in Africa," CSAE Working Paper Series 2013-08, Centre for the Study of African Economies, University of Oxford.

    More about this item

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • Q34 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Natural Resources and Domestic and International Conflicts

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