Diamonds,Rebel’s and Farmer’s Best Friend: Impact of Variation in the Price of a Lootable,Labor-intensive Natural Resource on the Intensity of Violent Conflict

Abstract

This article investigates the impact of the world price of a “lootable,” labor-intensive natural resource on intensity of violent conflict. Results suggest that a price increase can have opposite effects at different geographical levels of analysis: a decrease in conflict intensity overall in resource-rich countries, but an increase in conflict intensity in resource-rich subnational regions. The article argues that intensity of violence decreases overall due to rising opportunity costs of rebellion but that violence concentrates in resource-rich areas as returns to looting rise. The article introduces a new measure of diamond propensity based on geological characteristics, which is arguably exogenous to conflict and can capture small-scale labor-intensive production better than existing measures. The stated effects are found for secondary diamonds, which are lootable and related to opportunity costs of fighting, but not for primary diamonds, which are neither.