Economic shocks and civil conflict

1. Economic shocks and civil conflict -- based on “Transitory Economic Shocks and Civil Conflict” by Ciccone -- “Democracy, Growth, and Civil War” by Brückner&Ciccone

2. 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?

3. (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

4. Transitory positive shock at t=1(e.g. rainfall shock) negative growth conflict onset? 0 1 2 3 4 time YES…but then conflict may follow positive, not negative shocks!

5. 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

7. Latest PRIO conflict data • (i) same period as before (1981-1999) • (ii) longest possible period (1981-2006)

10. Civil war? No reduced form effect of rainfall shocks on civil war onset

11. Instrumental variables approach • Use rainfall as instrument for deviation of income per capita from trend

12. (First stage)

13. (Second stage)

14. (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?

15. Permanent positive shock at t=1(e.g. natural resource prices) 0 1 2 3 4 time

16. 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

17. 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

18. (3-year average)

19. Instrumental variables approach • Use commodity price growth as instrument for economic growth

20. (First stage) (3-year average)

21. (Second stage)

22. Civil conflict? No reduced form effect of commodity prices shocks on civil conflict onset

23. Robustness • excluding large commodity suppliers (more than 3% of world supply) • agricultural vis-à-vis natural resource commodities

25. Heterogenous effects • high versus low initial income • democracies versus autocracies

26. (Reduced form)

27. 11 (Reduced form) (F&PF versus NF)

28. 12 (Reduced form)

29. Conclusions Civil war Permanent negative shocks (commodity prices) Civil conflict Transitory negative shocks (rainfall)

30. Supplementary Table (First stage)