We investigate the causes of civil war, using a new data set of wars during 1960-99. We test a `greed' theory focusing on the ability to finance rebellion, against a `grievance' theory focusing on ethnic and religious divisions, political repression and inequality. We find that greed considerably outperforms grievance. Consistent with the greed theory, both dependence upon primary commodity exports and a large diaspora substantially increase the risk of conflict. Inconsistent with the grievance theory, greater ethnic and religious diversity reduce the risk of conflict. The results are robust to correction for outliers, alternative variable definition, and variations in estimation method.

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We investigate whether civil wars have economic causes. The model is based on utility theory, rebels will conduct a civil war if the perceived benefits outweigh the costs of rebellion. Using probit and tobit models the propositions are tested empirically. Four variables, initial income, ethno-linguistic fractionalisation, the amount of natural resources, and initial population size are significant and strong determinants of the duration and the probability of civil wars. One important finding is that the relationship between civil wars and ethnic diversity is non-monotonic; highly fractionalised societies have no greater risk of experiencing a civil war than homogenous ones. Population: population data for 1960 was obtained from the World Bank 'World Data' CD-ROM (SP POP TOTL). Ethnolinguistic Fractionalisation Index (ELF): Index as used by Mauro (1995). This variable measures the probability that any two citizens will be drawn from a different ethno-linguistic group. The variable is re-scaled so that complete homogeneity scores zero and maximum fragmentation scores 100.