IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper

War Signals: A Theory of Trade, Trust and Conflict

  • Dominic Rohner
  • Mathias Thoenig
  • Fabrizio Zilibotti

We construct a dynamic theory of civil conict hinging on inter-ethnic trust and trade. The model economy is inhabitated 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 conict 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 reect 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.oxcarre.ox.ac.uk/images/stories/papers/ResearchPapers/oxcarrerp201158.pdf
Download Restriction: no

Paper provided by Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford in its series OxCarre Working Papers with number 058.

as
in new window

Length:
Date of creation: 2011
Date of revision:
Handle: RePEc:oxf:oxcrwp:058
Contact details of provider: Postal:
Manor Road, Oxford, OX1 3UQ

Web page: http://www.oxcarre.ox.ac.uk/
Email:


More information through EDIRC

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. 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.
  2. Sandeep Baliga & Tomas Sjostrom, 2001. "Arms Races and Negotiations," NajEcon Working Paper Reviews 391749000000000005, www.najecon.org.
  3. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade not War?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00293018, HAL.
  4. 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.
  5. Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
  6. Pierre Cahuc & Andrei Shleifer & Philippe Aghion & Yann Algan, 2009. "Regulation and Distrust," Sciences Po publications 14648, Sciences Po.
  7. Hassler, John & Mora, Jose & Storesletten, Kjetil & Zilibotti, Fabrizio, 2002. "The Survival of the Welfare State," Seminar Papers 704, Stockholm University, Institute for International Economic Studies.
  8. Timothy Besley & Torsten Persson, 2011. "The Logic of Political Violence," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1411-1445.
  9. Paul Collier & Anke Hoeffler & Dominic Rohner, 2006. "Beyond Greed and Grievance: Feasibility and Civil War," Economics Series Working Papers WPS/2006-10, University of Oxford, Department of Economics.
  10. World Bank, 2012. "World Development Indicators 2012," World Bank Publications, The World Bank, number 6014, April.
  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. Stefan Dercon & Roxana Gutiérrez-Romero, 2010. "Triggers and Characteristics of the 2007 Kenyan Electoral Violence," CSAE Working Paper Series 2010-12, Centre for the Study of African Economies, University of Oxford.
  13. Jackson, Matthew O. & Morelli, Massimo, . "Political bias and war," Working Papers 1247, California Institute of Technology, Division of the Humanities and Social Sciences.
  14. 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.
  15. Dewatripont, Mathias & Tirole, Jean, 2004. "Modes of Communication," IDEI Working Papers 323, Institut d'Économie Industrielle (IDEI), Toulouse.
  16. Powell, Robert, 2006. "War as a Commitment Problem," International Organization, Cambridge University Press, vol. 60(01), pages 169-203, January.
  17. Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
  18. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  19. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2007. "Cultural Biases in Economic Exchange?," Economics Working Papers ECO2007/42, European University Institute.
  20. Gartzke, Erik, 1999. "War Is in the Error Term," International Organization, Cambridge University Press, vol. 53(03), pages 567-587, June.
  21. Christopher Blattman & Edward Miguel, 2010. "Civil War," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 3-57, March.
  22. 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.
  23. repec:spo:wpecon:info:hdl:2441/10149 is not listed on IDEAS
  24. Alan M. Taylor & Reuven Glick, 2005. "Collateral Damage: Trade Disruption and the Economic Impact of War," Working Papers 515, University of California, Davis, Department of Economics.
  25. Jeffrey Ely & Jusso Valimaki, 2002. "Bad Reputation," NajEcon Working Paper Reviews 391749000000000514, www.najecon.org.
    • Jeffrey C. Ely & Juuso Valimaki, 2002. "Bad Reputation," Discussion Papers 1348, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  26. Acemoglu, Daron & Zilibotti, Fabrizio, 1997. "Was Prometheus Unbound by Chance? Risk, Diversification, and Growth," Journal of Political Economy, University of Chicago Press, vol. 105(4), pages 709-51, August.
  27. 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.
  28. Jha, Saumitra, 2008. "Trade, Institutions and Religious Tolerance: Evidence from India," Research Papers 2004, Stanford University, Graduate School of Business.
  29. Christophe Chamley, 1999. "Coordinating Regime Switches," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 869-905.
  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. Paul Collier & Anke Hoeffler, 2004. "Greed and Grievance in Civil War," Development and Comp Systems 0409007, EconWPA.
  32. Esther Hauk & Maria Sáez, 1999. "On the cultural transmission of corruption," Economics Working Papers 392, Department of Economics and Business, Universitat Pompeu Fabra.
  33. Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-73, October.
  34. Scott Gates, 2002. "Recruitment and Allegiance," Journal of Conflict Resolution, Peace Science Society (International), vol. 46(1), pages 111-130, February.
  35. Jeffrey C. Ely & Juuso Välimäki, 2003. "Bad Reputation," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 785-814.
  36. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 551-584.
  37. 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.
  38. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  39. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June.
  40. 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.
  41. Rohner, Dominic, 2011. "Reputation, group structure and social tensions," Journal of Development Economics, Elsevier, vol. 96(2), pages 188-199, November.
  42. 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.
  43. Shanley Pinchotti & Philip Verwimp, 2007. "SOCIAL CAPITAL and the RWANDAN GENOCIDE A Micro-Level Analysis," HiCN Working Papers 30, Households in Conflict Network.
  44. repec:hal:journl:hal-00293024 is not listed on IDEAS
  45. Abhijit V. Banerjee, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 797-817.
  46. Sandeep Baliga & Tomas Sjöström, 2004. "Arms Races and Negotiations," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 351-369.
  47. 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.
  48. 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.
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:oxf:oxcrwp:058. 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: (Celia Kingham)

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.