Stimulant or depressant? Resource-related income shocks and conflict

Kai Gehring (), Sarah Langlotz () and Stefan Kienberger ()
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Kai Gehring: University of Zurich
Sarah Langlotz: Heidelberg University
Stefan Kienberger: University of Salzburg

No 286, HiCN Working Papers from Households in Conflict Network

Abstract: We provide evidence about the mechanisms linking resource-related income shocks to conflict. To do so, we combine temporal variation in international drug prices with new data on spatial variation in opium suitability. We find a conflict-reducing effect of higher drug prices over the 2002-2014 period, both in a reduced-form setting and using instrumental variables. There are two main mechanisms. First, we highlight the role of opportunity costs by showing that opium profitability positively affects household living standards. Second, by using data on the drug production process, ethnic homelands, and Taliban versus pro-government influence, we show that, on average, opportunity cost effects dominate contest effects. Contest effects depend on the degree of group competition over valuable resources. The conflict-reducing effect of higher prices is higher in areas that are more plausibly dominated by one group.

Keywords: Resources; resource curse; conflict; drugs; illicit economy; illegality; geography of conflict; Afghanistan; Taliban (search for similar items in EconPapers)
JEL-codes: D74 K4 O53 Q1 (search for similar items in EconPapers)
Date: 2018-11, Revised 2020-04
New Economics Papers: this item is included in nep-dev and nep-opm
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:hic:wpaper:286

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