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Stimulant or Depressant? Resource-Related Income Shocks and Conflict

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  • Kai Gehring
  • Sarah Langlotz
  • Stefan Kienberger

Abstract

We provide evidence about the mechanisms linking resource-related income shocks to conflict. Combining temporal variation in international drug prices with spatial variation in the suitability to produce opium, we show that higher drug prices reduce conflict over the 2002-2014 period in Afghanistan. There are two main mechanisms. First, household living standards and thus the opportunity costs of fighting increase. Second, we hypothesize that the opportunity cost effects dominate contest effects if the degree of group competition over valuable resources is sufficiently small. Regressions using georeferenced data on drug production, ethnic homelands, and Taliban versus pro-government influence support this hypothesis.

Suggested Citation

  • Kai Gehring & Sarah Langlotz & Stefan Kienberger, 2019. "Stimulant or Depressant? Resource-Related Income Shocks and Conflict," CESifo Working Paper Series 7887, CESifo.
    • Handle: RePEc:ces:ceswps:_7887
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp7887.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    resources; resource curse; conflict; drugs; illicit economy; illegality; geography of conflict; Afghanistan; Taliban;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

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