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War signals: a theory of trade, trust and conflict


Rohner, Dominic; Thoenig, Mathias; Zilibotti, Fabrizio (2013). War signals: a theory of trade, trust and conflict. Review of Economic Studies, 80(3):1114-1147.

Abstract

We construct a theory of persistent civil conflicts, where persistence is driven by the endogenous dynamics of inter-ethnic trust and trade. In times of peace, agents belonging to two groups are randomly matched to trade bilaterally. Trade hinges on trust and cooperation. The onset of conflict signals that the aggressor has a low propensity to cooperate, harming future trust and trade. Agents observe the history of conflicts and update their beliefs over time. The theory predicts that civil wars are persistent. Moreover, even accidental conflicts that do not reflect economic fundamentals erode trust, and can plunge a society into a vicious cycle of recurrent conflicts (a war trap). The incidence of conflict can be reduced by policies abating cultural barriers, fostering inter-ethnic trade and human capital, and shifting beliefs. Coercive peace policies, such as peacekeeping forces or externally imposed regime changes, have no enduring effects.

Abstract

We construct a theory of persistent civil conflicts, where persistence is driven by the endogenous dynamics of inter-ethnic trust and trade. In times of peace, agents belonging to two groups are randomly matched to trade bilaterally. Trade hinges on trust and cooperation. The onset of conflict signals that the aggressor has a low propensity to cooperate, harming future trust and trade. Agents observe the history of conflicts and update their beliefs over time. The theory predicts that civil wars are persistent. Moreover, even accidental conflicts that do not reflect economic fundamentals erode trust, and can plunge a society into a vicious cycle of recurrent conflicts (a war trap). The incidence of conflict can be reduced by policies abating cultural barriers, fostering inter-ethnic trade and human capital, and shifting beliefs. Coercive peace policies, such as peacekeeping forces or externally imposed regime changes, have no enduring effects.

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13 citations in Web of Science®
16 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Beliefs, civil war, conflict, cooperation, cultural transmission, human capital, learning, matching, peacekeeping, stochastic war, strategic complementarity, trade
Language:English
Date:July 2013
Deposited On:29 Jan 2014 10:17
Last Modified:08 Dec 2017 03:28
Publisher:Oxford University Press
ISSN:0034-6527
Additional Information:See also ECON Working Paper No. 13 (http://www.zora.uzh.ch/51517/)
Publisher DOI:https://doi.org/10.1093/restud/rdt003
Related URLs:http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=89102822&site=ehost-live

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