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Conflict Diamonds

  • Olsson, Ola

    ()

    (Department of Economics, School of Economics and Commercial Law, Göteborg University)

’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 might increase the ruler’s public utility investments, it might also lead to a crowding-out in favor of defense spendings, which depresses growth. As predicted by the model, a cross-country regression analysis suggests that diamond abundance has a ’U-shaped’ relationship with economic growth.

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File URL: http://hdl.handle.net/2077/2831
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Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 86.

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Length: 26 pages
Date of creation: 09 Jan 2003
Date of revision: 30 Nov 2003
Handle: RePEc:hhs:gunwpe:0086
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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  1. Gylfason, Thorvaldur, 2000. "Natural Resources, Education, and Economic Development," CEPR Discussion Papers 2594, C.E.P.R. Discussion Papers.
  2. Olsson, Ola & Hibbs Jr., Douglas A., 2000. "Biogeography and Long-Run Economic Development," Working Papers in Economics 26, University of Gothenburg, Department of Economics, revised 11 Aug 2000.
  3. Sachs, Jeffrey D. & Warner, Andrew M., 2001. "The curse of natural resources," European Economic Review, Elsevier, vol. 45(4-6), pages 827-838, May.
  4. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-83, May.
  5. Anne D. Boschini & Jan Pettersson & Jesper Roine, 2006. "Resource curse or not: A question of appropriability," DEGIT Conference Papers c011_050, DEGIT, Dynamics, Economic Growth, and International Trade.
  6. Mehlum,H. & Moene,K. & Torvik,R., 2000. "Predator or prey? : parasitic enterprises in economic development," Memorandum 27/2000, Oslo University, Department of Economics.
  7. Skaperdas, S., 1991. "Cooperation, Conflict And Power In The Absence Of Property Rights," Papers 90-91-06a, California Irvine - School of Social Sciences.
  8. Tornell, Aaron & Lane, Philip R., 1998. "Are windfalls a curse?: A non-representative agent model of the current account," Journal of International Economics, Elsevier, vol. 44(1), pages 83-112, February.
  9. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
  10. Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-73, October.
  11. Auty, Richard M., 2001. "The political economy of resource-driven growth," European Economic Review, Elsevier, vol. 45(4-6), pages 839-846, May.
  12. Neary, Hugh M, 1997. " A Comparison of Rent-Seeking Models and Economic Models of Conflict," Public Choice, Springer, vol. 93(3-4), pages 373-88, December.
  13. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2006. "Institutions and the Resource Curse," Economic Journal, Royal Economic Society, vol. 116(508), pages 1-20, 01.
  14. Acemoglu, Daron & Johnson, Simon & Robinson, James A, 2002. "An African Success Story: Botswana," CEPR Discussion Papers 3219, C.E.P.R. Discussion Papers.
  15. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  16. Jack Hirshleifer, 1991. "The Paradox Of Power," Economics and Politics, Wiley Blackwell, vol. 3(3), pages 177-200, November.
  17. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-88, December.
  18. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
  19. Congdon Fors, Heather & Olsson, Ola, 2005. "Endogenous Institutional Change After Independence," Working Papers in Economics 163, University of Gothenburg, Department of Economics.
  20. Robinson, James A & Torvik, Ragnar & Verdier, Thierry, 2002. "Political Foundations of the Resource Curse," CEPR Discussion Papers 3422, C.E.P.R. Discussion Papers.
  21. Roemer, John E, 1985. "Rationalizing Revolutionary Ideology," Econometrica, Econometric Society, vol. 53(1), pages 85-108, January.
  22. Collier, Paul & Hoeffler, Anke, 2000. "Greed and grievance in civil war," Policy Research Working Paper Series 2355, The World Bank.
  23. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  24. Suk Jae Noh, 2002. "Production, Appropriation, and Income Transfer," Economic Inquiry, Western Economic Association International, vol. 40(2), pages 279-287, April.
  25. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September.
  26. Hugh Neary, 1997. "A comparison of rent-seeking models and economic models of conflict," Public Choice, Springer, vol. 93(3), pages 373-388, December.
  27. Olsson, Ola & Congdon, Heather, 2003. "Congo: The Prize of Predation," Working Papers in Economics 97, University of Gothenburg, Department of Economics, revised 30 Oct 2003.
  28. Stephen Knack & Philip Keefer, 1995. "Institutions And Economic Performance: Cross-Country Tests Using Alternative Institutional Measures," Economics and Politics, Wiley Blackwell, vol. 7(3), pages 207-227, November.
  29. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
  30. Bigsten, Arne & Moene, Karl Ove, 1996. "Growth and Rent Dissipation: The Case of Kenya," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 5(2), pages 177-98, June.
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