The role of markets on resource conflicts

Abstract

We develop a generalized theory of resource conflict. We demonstrate that the existence of a resource curse (or blessing) relies on two fundamental elements: (i) market conditions; and (ii) the production technology or agents’ preferences, depending on the context under study. When resource prices are treated as exogenous, we obtain the conventional result: an increase in the value of the resource rent, due to an increase in its price or its availability (or lower opportunity cost of appropriation), increases conflict. However, when the price of the contestable resource is endogenously determined (i.e., in local markets) or if markets do not exist, we find that the relationship between conflict intensity and resource abundance depends on the production technology or on agents’ preferences: conflict can increase when the contestable resource becomes scarcer. Therefore, our paper identifies a fundamental transmission mechanism in resource conflicts.