Economic Shocks and Battle Deaths in Civil Wars

In this paper, we study the effects of economic factors on the intensity of internal armed conflicts. We show that adverse ethnic compositions in the form of ethnic dominance and polarization are a critical determinant of the way countries react to commodity-induced income shocks and that positive as well as negative income shocks can intensity ongoing conflicts. While negative income shocks increase the death toll everywhere, positive shocks in countries with ethnic dominance and polarization also increase the death toll. This positive relationship may appear because income gains encourage rent-seeking and make it easier to finance conflicts. Finally, we show that the positive effect of terms of trade gains is driven by the effects of fossil fuel terms of trade gains in fuel exporting countries. These results are consistent with resource-curse theories predicting that rent-seeking can destroy the benefits of commodity windfalls, but only for countries with adverse ethnic compositions.