War and Peace: How Economic Prospects Drive Conflictuality

Shuguang Jiang (), Marie Claire Villeval (), Zhengping Zhang () and Jie Zheng ()
Additional contact information
Shuguang Jiang: Shandong University
Marie Claire Villeval: CNRS
Zhengping Zhang: Shandong University
Jie Zheng: Shandong University

No 17823, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We experimentally study how economic prospects and power shifts affect the risk of conflict through a dynamic power rivalry game. Players decide whether to maintain the status quo or challenge a rival under declining, constant, or growing economic prospects. We find that conflict rates are highest when economic prospects decline and lowest when they improve. A behavioral model incorporating psychological costs and reciprocity can explain these differences. A survey on U.S.-China relations supports the real-world relevance of these findings. Inspired by the Thucydides’s Trap, this study highlights how economic expectations shape conflict dynamics, offering key insights into geopolitical stability.

Keywords: conflict; economic prospects; Thucydides’s Trap; power shift; experiment (search for similar items in EconPapers)
JEL-codes: C83 C91 D74 D91 F51 (search for similar items in EconPapers)
Date: 2025-04
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