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

War signals: a theory of trade, trust and conflict

  • Dominic Rohner
  • Mathias Thoenig
  • Fabrizio Zilibotti

We construct a dynamic theory of civil conflict 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 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.econ.uzh.ch/static/wp/econwp013.pdf
Download Restriction: no

Paper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 013.

as
in new window

Length:
Date of creation: Mar 2011
Date of revision:
Handle: RePEc:zur:econwp:013
Contact details of provider: Postal: Rämistrasse 71, CH-8006 Zürich
Phone: +41-1-634 21 37
Fax: +41-1-634 49 82
Web page: http://www.econ.uzh.ch/
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. Paul Collier & Anke Hoeffler, 2004. "Greed and grievance in civil war," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 563-595, October.
  2. Doepke, Matthias & Zilibotti, Fabrizio, 2007. "Occupational Choice and the Spirit of Capitalism," CEPR Discussion Papers 6405, C.E.P.R. Discussion Papers.
  3. Sylvain Chassang & Gerard Padró i Miquel, 2010. "Conflict and Deterrence under Strategic Risk," The Quarterly Journal of Economics, MIT Press, vol. 125(4), pages 1821-1858, November.
  4. Felbermayr, Gabriel & Toubal, Farid, 2010. "Cultural proximity and trade," Munich Reprints in Economics 20351, University of Munich, Department of Economics.
  5. 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.
  6. 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.
  7. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," The Quarterly Journal of Economics, MIT Press, vol. 125(3), pages 1015-1049, August.
  8. Balinga, Sandeep & Sjostrom, Tomas, 2001. "Arms Races and Negotiations," Working Papers 3-01-2, Pennsylvania State University, Department of Economics.
  9. 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.
  10. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Make Trade Not War?," Review of Economic Studies, Oxford University Press, vol. 75(3), pages 865-900.
  11. Acemoglu, Daron & Ticchi, Davide & Vindigni, Andrea, 2009. "Persistence of civil wars," POLIS Working Papers 130, Institute of Public Policy and Public Choice - POLIS.
  12. Philippe Martin & Thierry Mayer & Mathias Thoenig, 2008. "Civil Wars and International Trade," Sciences Po publications info:hdl:2441/10149, Sciences Po.
  13. 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.
  14. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2005. "Cultural Biases in Economic Exchange," 2005 Meeting Papers 234, Society for Economic Dynamics.
  15. repec:hal:journl:hal-00293024 is not listed on IDEAS
  16. Yared, Pierre, 2010. "A dynamic theory of war and peace," Journal of Economic Theory, Elsevier, vol. 145(5), pages 1921-1950, September.
  17. Jeffrey C. Ely & Juuso Valimaki, 2002. "Bad Reputation," Discussion Papers 1348, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  18. Dercon, Stefan & Gutiérrez-Romero, Roxana, 2012. "Triggers and Characteristics of the 2007 Kenyan Electoral Violence," World Development, Elsevier, vol. 40(4), pages 731-744.
  19. Hauk, Esther & Sáez-Martí, María, 2001. "On the Cultural Transmission of Corruption," Working Paper Series 564, Research Institute of Industrial Economics.
  20. Powell, Robert, 2006. "War as a Commitment Problem," International Organization, Cambridge University Press, vol. 60(01), pages 169-203, January.
  21. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
  22. Christophe Chamley, 1999. "Coordinating Regime Switches," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 869-905, August.
  23. Christopher Blattman & Edward Miguel, 2009. "Civil War," NBER Working Papers 14801, National Bureau of Economic Research, Inc.
  24. World Bank, 2012. "World Development Indicators 2012," World Bank Publications, The World Bank, number 6014.
  25. repec:spo:wpecon:info:hdl:2441/10149 is not listed on IDEAS
  26. Reuven Glick & Alan M. Taylor, 2010. "Collateral Damage: Trade Disruption and the Economic Impact of War," The Review of Economics and Statistics, MIT Press, vol. 92(1), pages 102-127, February.
  27. 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.
  28. Thomas Piketty, 1994. "Social Mobility and Redistributive Politics," Working papers 94-15, Massachusetts Institute of Technology (MIT), Department of Economics.
  29. Matthew O. Jackson & Massimo Morelli, 2007. "Political Bias and War," American Economic Review, American Economic Association, vol. 97(4), pages 1353-1373, September.
  30. repec:hal:journl:halshs-00641280 is not listed on IDEAS
  31. Dewatripont, Mathias & Tirole, Jean, 2004. "Modes of Communication," IDEI Working Papers 323, Institut d'Économie Industrielle (IDEI), Toulouse.
  32. Fearon, James D., 1995. "Rationalist explanations for war," International Organization, Cambridge University Press, vol. 49(03), pages 379-414, June.
  33. Philippe Aghion & Yann Algan & Pierre Cahuc, 2011. "Civil Society And The State: The Interplay Between Cooperation And Minimum Wage Regulation," Journal of the European Economic Association, European Economic Association, vol. 9(1), pages 3-42, 02.
  34. Paul Collier & Anke Hoeffler & Dominic Rohner, 2009. "Beyond greed and grievance: feasibility and civil war," Oxford Economic Papers, Oxford University Press, vol. 61(1), pages 1-27, January.
  35. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  36. 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.
  37. Avinash Dixit, 2003. "Trade Expansion and Contract Enforcement," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1293-1317, December.
  38. Jha, Saumitra, 2008. "Trade, Institutions and Religious Tolerance: Evidence from India," Research Papers 2004, Stanford University, Graduate School of Business.
  39. Cooper, Russell & John, Andrew, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, MIT Press, vol. 103(3), pages 441-63, August.
  40. Collier, Paul & Hoeffler, Anke, 1998. "On Economic Causes of Civil War," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 563-73, October.
  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. 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.
  43. Dominic Rohner, 2008. "Reputation, Group Structure and Social Tensions," HiCN Working Papers 40, Households in Conflict Network.
  44. Sandeep Baliga & Tomas Sj�str�m, 2004. "Arms Races and Negotiations," Review of Economic Studies, Oxford University Press, vol. 71(2), pages 351-369.
  45. Gartzke, Erik, 1999. "War Is in the Error Term," International Organization, Cambridge University Press, vol. 53(03), pages 567-587, June.
  46. Torvik, Ragnar, 2002. "Natural resources, rent seeking and welfare," Journal of Development Economics, Elsevier, vol. 67(2), pages 455-470, April.
  47. Timothy Besley & Torsten Persson, 2011. "The Logic of Political Violence," The Quarterly Journal of Economics, Oxford University Press, vol. 126(3), pages 1411-1445.
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:zur:econwp:013. 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: (Marita Kieser)

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.