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War and Peace: How Economic Prospects Drive Conflictuality

Author

Listed:
  • Jiang, Shuguang

    (Shandong University)

  • Villeval, Marie Claire

    (CNRS)

  • Zhang, Zhengping

    (Shandong University)

  • Zheng, Jie

    (Shandong University)

Abstract

We experimentally study how economic prospects and power shifts affect the risk of conflict through a dynamic power rivalry game. Players decide whether to maintain the status quo or challenge a rival under declining, constant, or growing economic prospects. We find that conflict rates are highest when economic prospects decline and lowest when they improve. A behavioral model incorporating psychological costs and reciprocity can explain these differences. A survey on U.S.-China relations supports the real-world relevance of these findings. Inspired by the Thucydides’s Trap, this study highlights how economic expectations shape conflict dynamics, offering key insights into geopolitical stability.

Suggested Citation

  • Jiang, Shuguang & Villeval, Marie Claire & Zhang, Zhengping & Zheng, Jie, 2025. "War and Peace: How Economic Prospects Drive Conflictuality," IZA Discussion Papers 17823, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp17823
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    References listed on IDEAS

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    1. Joshua D. Angrist & Adriana D. Kugler, 2008. "Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 191-215, May.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Thucydides’s Trap; economic prospects; conflict; power shift; experiment;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions

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