Economic Shocks and Civil Conflict: An Instrumental Variables Approach

Abstract

Determining the impact of poverty on the likelihood of civil conflict in less developed countries is difficult because of omitted variable bias and endogeneity. We use exogenous weather variation - as measured in satellite vegetation readings - as an instrumental variable for economic growth in 40 Sub-Saharan African countries during 1983-1999, and estimate that economic growth is strongly negatively related to the incidence of civil conflict: a negative growth shock of 5 percentage points increases the likelihood of major civil conflicts by roughly one-half. This relationship is not significantly different in countries that have higher per capita income, that are more democratic or more ethnically diverse. We use a new and comprehensive dataset of civil conflict in the analysis.