International Prices and Continuing Conflict Theory and Evidence from Sub-Saharan Africa (1980-2017)

Raul Caruso () and Jon Echevarria ()
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Jon Echevarria: Departamento de Fundamentos del Análisis Económico II, Universidad del País Vasco / Euskal Herriko Unibertsitatea

No 1006, Working Papers from European Centre of Peace Science, Integration and Cooperation (CESPIC), Catholic University 'Our Lady of Good Counsel'

Abstract: This paper presents first a theoretical model of conflict between two parties in a two-sector economy. In a ‘contested’ sector, they struggle to appropriate the maximum possible fraction of a contestable output. In an ‘uncontested’ sector, they hold secure property rights over the production of some goods. Parties split their resource endowment between ‘butter’, ‘guns’ (in the contested sector) and ‘ice cream’ (in the uncontested sector). The model predicts that the level of guns depends positively on the relative price of goods produced in contested and those produced in the uncontested sector. As the relative price decreases actors decrease their outlays in ‘guns’. The empirical section is focused on a panel of Sub-Saharan African countries for the period 1980-2017. Results show that international prices of manufactures (interpreted as the uncontested ice-cream sector) are negatively associated with arms imports and military expenditure so confirming the theoretical prediction. The results appear to be robust. In addition, we have checked whether world prices have an impact on the probability of an armed conflict. We found that internal and internationalised civil conflicts react differently to world prices.

Keywords: Theoretical model of conflict; resource curse; butter guns and ice cream; structure of the economy; commodity prices; MUV; military expenditures; arms imports; civil war (search for similar items in EconPapers)
JEL-codes: D74 H56 O13 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-02
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