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Grant Gordon, Gov2782

Are All Resources Cursed? Coffee, Oil and Armed Conflict in Colombia - Oeindrilla Dube & Juan Vargas. Grant Gordon, Gov2782. The Resource Curse. The Resource Curse: “ The dependence on natural commodities increases the incidence of civil war” (Collier & Hoeffler 2004)

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Grant Gordon, Gov2782

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  1. Are All Resources Cursed? Coffee, Oil and Armed Conflict in Colombia- Oeindrilla Dube & Juan Vargas Grant Gordon, Gov2782

  2. The Resource Curse The Resource Curse: “The dependence on natural commodities increases the incidence of civil war” (Collier & Hoeffler 2004) • Rebels use stole rents from export to finance violence • Blood Wheat? “Oil exporters have weaker bureaucratic capabilities, which increases the incidence of civil war” (Fearon 2005) • Petroleum drives the findings for all primary commodities • The Mechanism?

  3. Determining The Mechanism Taxes, Strong State & Military Operations Primary Commodity Looting, Extortion Civil Conflict Lack of State Investment; Weakness

  4. The Resource Curse, 2.0 Theoretical Exploration and Parsing: • Factor Intensity of Production Technology • Relative importance of one input (factor) vs. another, compared across industries • Inputs: Capital, Land, Labor • Stolper-Samuelson Theorem • A rise in the relative price of a good increases the return on the factor which is used most intensively in the production of that good and a decrease in all other factors. Thus, the income mechanism (think relatively!): Coffee Price , Income , Opportunity Cost for Rebellion , Violence

  5. Are All Resources Cursed Equally? Heterogeneous Resources, Heterogeneous Mechanisms: • Oil & the government revenue mechanism: Oil Price , Gov Revenue , Security Operations , Violence • Substitution Effects into Coca? • What is the mechanism here? “Some resources are cursed, while others are not” - Sometimes substitution doesn’t happen

  6. The Coffee Crisis Exogenous Crises Make For Good Studies • 1994-1997: Coffee prices increasing • 1997-2003: Precipitous drop in coffee prices Identifying assumption: international prices exogenous to Colombian production

  7. The Data & The Methods The Data • Panel Data: Municipality and Years • IID assumption? Spatio-Temporal Autocorrelation? • Standard Clustered Errors Difference-in-Difference Estimation • Compare impact post-treatment of treatment group to some control group; subtract out treatment effect • Unit of Analysis: Municipalities • Assumption: “That violence levels would not have changed different in coffee and non-coffee areas in the absence of the coffee price shock”

  8. The Findings

  9. But What About? Potential Confounders: • Plan Columbia – clashes & casualties • 1999 Earthquake – not significant; predation unlikely • Changes in Government Regime – not a driving force Oil • Increase in price leads to an increase in security forces • Capital intensive process • Traditional resource curse revisited

  10. The Resource Curse 2.0 “The higher value of this [coffee] commodity in international markets eases social unrest, while a lower value exacerbates politically-motivated violence” Resources vs. Factors of Labor • What is the right way to think of this? Mechanism vs. Decision • Substitution into rebel groups rather than coca?

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