Corruption, Conflict and the Management of Natural Resources

The documented link between natural resources and civil conflict is not well understood. This paper uses a political economy framework to explore the emergence of resource-based civil conflict driven by group-level discontent. Previous models of resource conflicts are premised on the idea that the desire of enrichment by appropriating resources is the driving force for insurgents. This approach,however, treats the management of the contentious resources as exogenous, while also failing to account for the grassroots dissatisfaction that is often reported to spark and/or sustain rebellions. The proposed theoretical model offers a policy-based alternative -- under conditions related to the quality of governance, discontent about resource management can be instrumental in increasing the likelihood of an insurgency. While influential contributions in the literature tell the ‘resource abundance implies opportunity, implies greed-based conflict’ story, this paper focuses on relative scarcity to justify discontent and prompt a ‘grievance-based’ rebellion. The resource policy arises endogenously as the corrupt government trades off industry contributions and the cost induced by manifestations of resource-related discontent. Conservation effects of both internal pressure, in the form of civil unrest, and external pressure in the form of international trade and aid measures are analyzed in turn, and regulator corruption is shown to be an important ingredient of conflict. The last part presents some empirical evidence in support of the model’s predictions.