Economic Shocks and Conflict: The (Absence of?) Evidence from Commodity Price- Working Paper 274
One of the most influential ideas in the study of political instability is that income shocks provoke conflict. “State prize” theories argue that higher revenues increase incentives to capture the state. “Opportunity cost” theories argue that higher prices decrease individual incen-tives to revolt. Both mechanisms are central to leading models of state development and collapse. But are they wellfounded? We examine the effects of exogenous commodity price shocks on conflict and coups, and find little evidence in favor of either theory. Evidence runs especially against the state as prize. We do find weak evidence that the intensity of fighting falls as prices rise—results more consistent with the idea that revenues augment state capacity, not prize-seeking or opportunity cost. Nevertheless, the evidence for any of these income-conflict mecha-nisms is weak at best. We argue that errors and publication bias have likely distorted the theoret-ical and empirical literature on political instability.
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