Economic Shocks and Conflict: The (Absence of?) Evidence from Commodity Prices - Working Paper 274

wars rises with export prices—evidence consistent with the state as prize. Meanwhile, Brückner and Ciccone (2010) and Savun and Cook (2010) find a seeming opposite result: rising prices dramatically reduce the risk of new conflicts—evidence consistent with the opportunity cost theory. We show these results are sensitive to the conflict measure, sample, and misspecification.

Our findings raise a broader concern of research and publication bias in the conflict literature.

Cross-national analysis of civil war suffers from many of the risk factors associated with high publication bias (Ioannidis 2005). Most of all, we worry that the most widely-cited evidence has not been adequately checked for robustness, and that null cases commonly go unpublished.

The right answer is important. The link from income to conflict has become one of the most widely accepted facts in the literature on social unrest. The opportunity cost and state prize ideas are the engines of the mainstream models of state development and political transitions. These theories are also influential in policy. For example, states, militaries, and aid agencies predicate youth employment programs and ex-combatant reintegration on the opportunity cost idea.

Should we conclude that a causal relationship from income shocks to conflict is non-existent?

Not yet. We see weak evidence that economic shocks affect the intensity (rather than the onset) of conflict. Rising prices, both agricultural and mineral, lead to fewer battle deaths. The pattern is consistent with evidence from Colombia that conflict intensity falls as coffee prices rise (Dube and Vargas 2009). It is also consistent with the idea that instigating new wars is more difficult than escalating present ones and that, in ongoing conflicts, opportunity cost matters.

Is this a victory for the opportunity cost story? We urge caution. First, the result is still fragile, and requires better intensity data to be sure. Second, the patterns we see are also consistent with an alternative we dub the “state capacity” theory: states collapse into war when they lack the capacity to suppress insurgency or bargain with competitors—capacities linked to state revenues.

This revenue-centered approach has a long tradition in political science but has seldom found its 3