Commodity Price Shocks and Civil Conflict: Evidence from Colombia

Abstract

This paper explores how commodity price shocks in the international market a¤ect armed con ‡ict. Using a new dataset on civil war in Colombia, we …nd that exogenous price shocks in the co¤ee and oil markets a¤ect con ‡ict in opposite directions, and through separate channels. A sharp fall in co¤ee prices during the late 1990s increased violence disproportionately in co¤ee-intensive municipalities, by lowering wages and the opportunity cost of recruitment into armed groups. In contrast, a rise in oil prices increased con ‡ict in the oil region, by expanding local government budgets and raising potential gains from rapacity and predation on these resources. Our analysis suggests that the price of labor intensive goods a¤ect con ‡ict primarily through the opportunity cost e¤ect, while the price of capital intensive goods a¤ect con ‡ict through the rapacity channel.We are especially grateful to Arin Dube for detailed comments and to

Climate and the slave trade

“…Violence in Colombia intensifies when coca or oil prices rise (Angrist and Kugler, 2008;Dube and Vargas, 2013), livestock raiding in Kenya intensifies when herds are healthy (Witsenburg and Adano, 2009), and Japan's long recession has cut into the yakuza's profits from racketeering (Hill, 2006, p. 247). The dynamics of the slave trade, then, followed a logic similar to the model of Besley and Persson (2011); greater state revenues encouraged repression (slave raiding) under non-cohesive political institutions.…”

War and conflict in economics: Theories, applications, and recent trends

“…The recent literature provides confirmation of some of the predictions of contest theory, e.g., in empirical work showing that changes in incentives to initiate and participate in conflict do, in fact, change the likelihood of conflict in a manner predicted by conflict theory (see e.g., Dube and Vargas, 2013;Powell, 2013;Fearon, 2011), and that the size and discouragement effects are visible in the context of government lobbying (Kang, 2016).…”

“…In a contest between a state and an insurgent group over regional resources, Dube and Vargas (2013) establish that the nature of the resource's production technology matters for the incentive effect; by studying the effect of commodity price shocks on violence in regions of Colombia, they show that positive price shocks in capital-intensive natural resources like oil and gold cause the expected increase in conflict from the incentive effect, but that positive shocks to labor-intensive resources like coffee actually reduce conflict.…”

“…They find that among juveniles who faced any court case, those who were incarcerated were 6.1 percentage points more likely to be incarcerated for violent crime as an adult. Similarly to the coffee farmers in Dube and Vargas (2013), the proposed mechanism is a change in the value of an individual's outside option, in that being incarcerated as a juvenile is particularly disruptive to human capital formation, making violence less costly to the individual perpetrating it.…”

Economic Perspectives on Peaceand Conflict

“…Another, possibly complementary reason particularly in the case that the conflict is resource-driven has to do with the labor intensity of the production of resources over which conflict takes place. Dube and Vargas (2007) show that, in Colombia, increases in the price of coffee do not increase conflict but increases in the price of oil do. The primary reason for the different effects appears to be the relative labor intensity of coffee production and the relative capital intensity of oil production, implying distinct effects of shocks to the prices of coffee and oil on wages in the (segmented) local labor markets.…”