Economic Shocks and Civil War

This article revisits the relationship between income per capita and civil conflict. We begin by documenting that the empirical literature identifies two different patterns. First, poor countries have a higher propensity to suffer from civil war. Second, civil war occurs when countries suffer negative income shocks. In a formal model we examine an explanation often suggested in the informal literature: civil wars occur in poor countries because the opportunity cost of fighting is small. We show that while this explanation fails to make sense of the first empirical pattern, it provides a coherent theoretical basis for the second. We then enrich the model to allow for private imperfect information about the state of the economy and show that mutual fears exacerbate the problem caused by negative income shocks.