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Estimating the Effect of Transitory Economic Shocks on Civil Conflict

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  • Antonio Ciccone

Abstract

Economists and political scientists have argued that differences in the risk of civil conflict across countries and over time may partly reflect differences in the opportunity cost of participating in civil conflicts. One way to test for the opportunity-cost channel is to examine civil conflict risk following transitory income shocks. In this paper I propose two instrumental-variables approaches to estimate the effect of transitory income shocks on civil conflict risk. I also show that approaches not tailored to transitory income shocks may lead to the conclusion that negative income shocks increase the risk of civil conflict - which would seem consistent with an opportunity-cost channel - when they actually lower civil conflict risk. I illustrate these issues by revisiting Miguel, Satyanath, and Sergenti's (2004) conclusion that negative income shocks increase the risk of civil conflict in Subsaharan Africa.

Suggested Citation

  • Antonio Ciccone, 2013. "Estimating the Effect of Transitory Economic Shocks on Civil Conflict," Review of Economics and Institutions, Università di Perugia, vol. 4(2).
    • Handle: RePEc:pia:review:v:4:y:2013:i:2:n:1
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    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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