Economic shocks and civil conflict

-- based on “Transitory Economic Shocks and Civil Conflict” by Ciccone-- “Democracy, Growth, and Civil War” by Brückner&Ciccone

This presentation and the literature

• aim to contribute to literature on economic shocks and civil conflict

• specifically:(1) rainfall shocks and civil conflict/war in Sub-Saharan Africa?

(2) commodity price shocks and civil conflict/war in SSA?

(1) Rainfall shocks and civil conflict/war

• Existing evidence: (rainfall growth) conflict/war onset and incidence (see Miguel et al “Economic Shocks and Civil Conflict: An Instrumental-Variables Approach,” JPE 2004)

• Result: (low growth)(high conflict probability)

But rainfall shocks are transitory and low rainfall growth may therefore be due to:-- negative rainfall shock-- mean reversion after positive rainfall shock

Transitory positive shock at t=1(e.g. rainfall shock)

time0 1 2 3 4

negative growth

conflict onset?

YES…but then conflict may follow positive, not negative shocks!

Civil conflict onset and transitory shocks

Level specification

Probability(Onsetct)=act+b*logRainfallct+c*logRainfallct-1

Growth specification

Probability(Onsetct)=act+b*(logRainfallct-logRainfallct-1)

caution: rainfall growth may be low because of a negative rainfall shock or mean-reversion following a positive rainfall shock

Latest PRIO conflict data

• (i) same period as before (1981-1999)• (ii) longest possible period (1981-2006)

Civil war?

No reduced form effect of rainfall shocks on civil war onset

Instrumental variables approach

• Use rainfall as instrument for deviation of income per capita from trend

(First stage)

(Second stage)

(2) Commodity prices and civil conflict/war?

• The timing of civil wars in Uganda, Rwanda, and Burundi appear to be related to fall in price of coffee, their biggest export

• Is there evidence of a more generalized link between commodity export prices and civil conflict/war?

• Can commodity price fluctuations be used to estimate the effects of economic growth shocks on civil conflict/war?

Permanent positive shock at t=1(e.g. natural resource prices)

time0 1 2 3 4

Civil conflict onset and permanent shocks

Level specification

Probability(Onsetct)=act+b*logPricect+c*logPricect-1

Growth specification

Probability(Onsetct)=act+b*(logPricect-logPricect-1)

caution: price series may be non-stationary

International Commodity Price Index

AGRICULTURAL COMMODITIES: bananas, cocoa, coffee, cotton, fish, groundnuts, livestock, sugar, tea, tobacco, wood.

NATURAL RESOURCES: aluminium, copper, gold, iron, nickel, oil, phosphates, uranium.

Sources: Deaton, 1999 JEP, UN ComTrade, IMF

(3-year average)

Instrumental variables approach

• Use commodity price growth as instrument for economic growth

(3-year average)

(First stage)

(Second stage)

Civil conflict?

No reduced form effect of commodity prices shocks on civil conflict onset

Robustness

• excluding large commodity suppliers (more than 3% of world supply)

• agricultural vis-à-vis natural resource commodities

Heterogenous effects

• high versus low initial income• democracies versus autocracies

(Reduced form)

(Reduced form)

11

(F&PF versus NF)

(Reduced form)

12

Conclusions

Civil war

Civil conflictTransitory negative

shocks (rainfall)

Permanent negative shocks

(commodity prices)

(First stage)

Supplementary Table