Essays on the economics of conflict and development

Abstract

The three chapters of this thesis focus on matters related to development economics, and conflict in particular. In the first chapter I examine whether people change their behaviour to adhere to rules imposed on them by rebels during occupation, and whether this effect persists after the occupation has ended. Moreover, I consider sources of heterogeneity that can drive these changes in the behaviour of people. Results suggests that people adjust behaviour to adhere to rules both during and after but that effect is very heterogeneous, especially in the longer run. Though there is evidence indicating that the presence of coca increases violence, changes to the price of coca products can have both negative and positive effects on conflict. The second chapter considers resource-fuelled conflict. Using novel data on local prices of coca products, production and supply chains, this study disentangles the returns to employment in the agricultural sector (cultivators) and employment in the criminal sector (militias and armed groups). This paper thereby identifies each agents’ respective exposure to price changes, and estimates the effect of such changes on violence. An increase in income from coca results in a reduction in violence, and this reduction comes with an increase in school attendance for rural households. An increase in the objective prize leads to more violence. Moreover, armed groups flock to the area that witnesses an such an increase, resulting in higher levels of competition which coincides with the timing of the increase in violence. Additionally, increases in expected returns to joining a militia can potentially lead to a higher school dropout rate among children. The final chapter explores the effect of alliance membership on defense spending in response to a threat. This paper focuses on two types of states (small and large) and how alliance membership shapes their response to threat. Using the synthetic control method, I find that both types of states have stronger (positive) response to threat as NATO members, compared to if they would not have been part of the alliance.