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The role of markets and preferences on resource conflicts

Author

Listed:
  • Alex Dickson

    (Department of Ecoomics, University of Strathclyde)

  • Ian A MacKenzie

    (School of Econimics, University of Queensland, Brisbane)

  • Petros G Sekeris

    (Montpellier Business School, France)

Abstract

This article investigates a generalized resource curse. The existing empirical and theoretical literature on the resources-conflict nexus argues that higher resource rents (or a lower opportunity cost of appropriation) exacerbates conflict. We demonstrate that these widely accepted results rely on two fundamental elements relating to market conditions and agents’ preferences. When resource prices are treated as exogenous, we obtain the conventional result, where an increase in the profitability of either the appropriative or productive activity incentivizes agents to reorient efforts accordingly. However, when the price of the contestable resource is endogeneously set (i.e., locally determined), we find the opposite result may hold depending on the nature of agents’ preferences: conflict can increase when the contestable resource becomes scarcer. Intuitively, if the contestable resource is abundant, players’ relative marginal utility of the resource will be low, thereby resulting in low relative prices. Increases in the size of the contestable resource will lead to a reduction in appropriation effort, whereas scarcities will be conducive to conflict. We show an identical result is obtained if markets are absent for the contestable resource, such as when considering civil liberties and political rights.

Suggested Citation

  • Alex Dickson & Ian A MacKenzie & Petros G Sekeris, 2018. "The role of markets and preferences on resource conflicts," Working Papers 1819, University of Strathclyde Business School, Department of Economics.
  • Handle: RePEc:str:wpaper:1819
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    References listed on IDEAS

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    More about this item

    Keywords

    Resource curse; conflict;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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