CID Graduate Student and Postdoctoral Fellow Working Paper No. 14, July 2008

Commodity Price Shocks and Civil Conflict: Evidence from Colombia

Oeindrila Dube and Juan F. Vargas

Abstract 

This paper explores how price shocks in international commodity markets affect armed conflict. Using a unique dataset on civil war in Colombia, we find that exogenous shocks to coffee and oil prices affect conflict in opposite directions, and through separate channels. A sharp fall in the price of coffee during the late 1990s increased violence disproportionately in coffee-intensive municipalities, by lowering wages and the opportunity cost of recruitment into armed groups. In contrast, a rise in oil prices increased violence differentially in the oil region, by expanding local government revenue and inviting predation on these resources. Our analysis suggests that the price of labor intensive agricultural goods affect conflict primarily through the opportunity cost effect, while the price of capital intensive natural resource commodities affects conflict through the rapacity channel.

Keywords: commodity prices, conflict, wages, agriculture, natural resources

JEL codes: Q34, F16,  O12, O13,  Q33,  F52, O54

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