IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

War Signals: A Theory of Trade, Trust and Conflict

  • Dominic Rohner

    ()

    (Department of Economics, University of Zurich)

  • Mathias Thoenig

    ()

    (Department of Economics, University of Lausanne)

  • Fabrizio Zilibottix

    ()

    (Department of Economics, University of Zurich)

We construct a dynamic theory of civil conflict hinging on inter-ethnic trust and trade. The model economy is inhabited by two ethnic groups. Inter-ethnic trade requires imperfectly observed bilateral investments and one group has to form beliefs on the average propensity to trade of the other group. Since conflict disrupts trade, the onset of a conflict signals that the aggressor has a low propensity to trade. Agents observe the history of conflicts and update their beliefs over time, transmitting them to the next generation. The theory bears a set of testable predictions. First, war is a stochastic process whose frequency depends on the state of endogenous beliefs. Second, the probability of future conflicts increases after each conflict episode. Third, "accidental" conflicts that do not reflect economic fundamentals can lead to a permanent breakdown of trust, plunging 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 instead no persistent effects.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.hicn.org/wordpress/wp-content/uploads/2012/06/wp95.pdf
Download Restriction: no

Paper provided by Households in Conflict Network in its series HiCN Working Papers with number 95.

as
in new window

Length: 49 pages
Date of creation: Jan 2011
Date of revision:
Handle: RePEc:hic:wpaper:95
Contact details of provider: Web page: http://www.hicn.org

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. repec:hal:journl:hal-00293024 is not listed on IDEAS
  2. Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010. "A theory of Fads, Fashion, Custom and cultural change as informational Cascades," Levine's Working Paper Archive 1193, David K. Levine.
  3. Felbermayr, Gabriel J. & Toubal, Farid, 2010. "Cultural proximity and trade," European Economic Review, Elsevier, vol. 54(2), pages 279-293, February.
  4. Matthias Doepke & Fabrizio Zilibotti, 2007. "Occupational Choice and the Spirit of Capitalism," NBER Working Papers 12917, National Bureau of Economic Research, Inc.
  5. Jeffrey C. Ely & Juuso Valimaki, 2002. "Bad Reputation," Discussion Papers 1348, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Dercon, Stefan & Gutiérrez-Romero, Roxana, 2012. "Triggers and Characteristics of the 2007 Kenyan Electoral Violence," World Development, Elsevier, vol. 40(4), pages 731-744.
  7. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June.
  8. Christopher Blattman & Edward Miguel, 2010. "Civil War," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 3-57, March.
  9. Sylvain Chassang & Gerard Padró I Miquel, 2010. "Conflict and Deterrence Under Strategic Risk," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1821-1858.
  10. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade not War?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00293018, HAL.
  11. Daron Acemoglu & Davide Ticchi & Andrea Vindigni, 2010. "Persistence of Civil Wars," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 664-676, 04-05.
  12. Reuven Glick & Alan M. Taylor, 2005. "Collateral Damage: Trade Disruption and the Economic Impact of War," NBER Working Papers 11565, National Bureau of Economic Research, Inc.
  13. Hauk, Esther & Saez-Marti, Maria, 2002. "On the Cultural Transmission of Corruption," Journal of Economic Theory, Elsevier, vol. 107(2), pages 311-335, December.
  14. Ingelaere, Bert, 2007. "Living the transition: a bottom-up perspective on Rwanda’s political transition," IOB Discussion Papers 2007.06, Universiteit Antwerpen, Institute of Development Policy and Management (IOB).
  15. Rohner, Dominic, 2011. "Reputation, group structure and social tensions," Journal of Development Economics, Elsevier, vol. 96(2), pages 188-199, November.
  16. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Civil Wars and International Trade," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 541-550, 04-05.
  17. Sandeep Baliga & Tomas Sjöström, 2004. "Arms Races and Negotiations," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 351-369.
  18. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  19. Daron Acemoglu & Fabrizio Zilibotti, 1994. "Was Prometheus unbound by chance? Risk, diversification and growth," Economics Working Papers 98, Department of Economics and Business, Universitat Pompeu Fabra.
  20. Yared, Pierre, 2010. "A dynamic theory of war and peace," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1921-1950, September.
  21. Christophe Chamley, 1999. "Coordinating Regime Switches," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 869-905.
  22. Aghion, Philippe & Algan, Yann & Cahuc, Pierre & Shleifer, Andrei, 2010. "Regulation and Distrust," Scholarly Articles 12490649, Harvard University Department of Economics.
  23. Nicholas Sambanis, 2008. "Short- and Long-Term Effects of United Nations Peace Operations," World Bank Economic Review, World Bank Group, vol. 22(1), pages 9-32, January.
  24. James D. Fearon, 2005. "Primary Commodity Exports and Civil War," Journal of Conflict Resolution, Peace Science Society (International), vol. 49(4), pages 483-507, August.
  25. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  26. Guiso, Luigi & Sapienza, Paola & Zingales, Luigi, 2005. "Cultural Biases in Economic Exchange," CEPR Discussion Papers 4837, C.E.P.R. Discussion Papers.
  27. Greif, Avner, 1994. "Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies," Journal of Political Economy, University of Chicago Press, vol. 102(5), pages 912-50, October.
  28. Karl R. Derouen JR & Jacob Bercovitch, 2008. "Enduring Internal Rivalries: A New Framework for the Study of Civil War," Journal of Peace Research, Peace Research Institute Oslo, vol. 45(1), pages 55-74, January.
  29. Hassler, John & Mora, José V Rodríguez & Storesletten, Kjetil & Zilibotti, Fabrizio, 2001. "The Survival of the Welfare State," CEPR Discussion Papers 2905, C.E.P.R. Discussion Papers.
  30. Paul Collier & Dominic Rohner, 2008. "Democracy, Development, and Conflict," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 531-540, 04-05.
  31. Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
  32. Balinga, Sandeep & Sjostrom, Tomas, 2001. "Arms Races and Negotiations," Working Papers 3-01-2, Pennsylvania State University, Department of Economics.
  33. Collier, Paul & Hoeffler, Anke, 2000. "Greed and grievance in civil war," Policy Research Working Paper Series 2355, The World Bank.
  34. Halvard Buhaug & Scott Gates & Päivi Lujala, 2009. "Geography, Rebel Capability, and the Duration of Civil Conflict," Journal of Conflict Resolution, Peace Science Society (International), vol. 53(4), pages 544-569, August.
  35. Mathias Dewatripont & Jean Tirole, 2005. "Modes of Communication," Journal of Political Economy, University of Chicago Press, vol. 113(6), pages 1217-1238, December.
  36. Powell, Robert, 2006. "War as a Commitment Problem," International Organization, Cambridge University Press, vol. 60(01), pages 169-203, January.
  37. Raquel Fernandez, 2007. "Culture as Learning: The Evolution of Female Labor Force Participation over a Century," NBER Working Papers 13373, National Bureau of Economic Research, Inc.
  38. Timothy Besley & Torsten Persson, 2011. "The Logic of Political Violence," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1411-1445.
  39. Scott Gates, 2002. "Recruitment and Allegiance," Journal of Conflict Resolution, Peace Science Society (International), vol. 46(1), pages 111-130, February.
  40. Cahuc, Pierre & Algan, Yann & Aghion, Philippe, 2009. "Civil Society and the State: The Interplay between Cooperation and Minimum Wage Regulation," Scholarly Articles 3226957, Harvard University Department of Economics.
  41. Shanley Pinchotti & Philip Verwimp, 2007. "SOCIAL CAPITAL and the RWANDAN GENOCIDE A Micro-Level Analysis," HiCN Working Papers 30, Households in Conflict Network.
  42. Thomas Piketty, 1994. "Social Mobility and Redistributive Politics," Working papers 94-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  43. Marshall Burke & John Dykema & David Lobell & Edward Miguel & Shanker Satyanath, 2010. "Climate and Civil War: Is the Relationship Robust?," NBER Working Papers 16440, National Bureau of Economic Research, Inc.
  44. Jeffrey C. Ely & Juuso Välimäki, 2003. "Bad Reputation," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 785-814.
  45. Gartzke, Erik, 1999. "War Is in the Error Term," International Organization, Cambridge University Press, vol. 53(03), pages 567-587, June.
  46. Jha, Saumitra, 2008. "Trade, Institutions and Religious Tolerance: Evidence from India," Research Papers 2004, Stanford University, Graduate School of Business.
  47. Nicholas Sambanis, 2001. "Do Ethnic and Nonethnic Civil Wars Have the Same Causes?," Journal of Conflict Resolution, Peace Science Society (International), vol. 45(3), pages 259-282, June.
  48. Matthew O. Jackson & Massimo Morelli, 2007. "Political Bias and War," American Economic Review, American Economic Association, vol. 97(4), pages 1353-1373, September.
  49. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 441-463.
  50. World Bank, 2012. "World Development Indicators 2012," World Bank Publications, The World Bank, number 6014, April.
  51. Paul Collier & Anke Hoeffler & Dominic Rohner, 2006. "Beyond Greed and Grievance: Feasibility and Civil War," CSAE Working Paper Series 2006-10, Centre for the Study of African Economies, University of Oxford.
  52. repec:spo:wpecon:info:hdl:2441/10149 is not listed on IDEAS
  53. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
  54. repec:hal:journl:halshs-00641280 is not listed on IDEAS
  55. Fernández, Raquel, 2007. "Culture as Learning: The Evolution of Female Labour Force Participation Over a Century," CEPR Discussion Papers 6451, C.E.P.R. Discussion Papers.
  56. Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-73, October.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hic:wpaper:95. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alia Aghajanian)

or ()

or ()

or ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.