Resources, Conflict, and Economic Development in Africa

Year: 2018 HiCN Working Paper No. 272

Evidence suggests that natural resources drive both conflict and underdevelopment in modern Africa. We show that this relationship exists primarily when neighboring regions are resource- rich. When neighbors are poor, resources have modest impacts on conflict, and instead drive economic growth. To highlight the role played by neighbors, we simultaneously incorporate multiple mechanisms in a model of strategic interaction between parties engaged in potential conflict over such resources. The likelihood of conflict depends on both the absolute and relative resource endowments of neighboring parties, as resources fuel conflict by raising the gains from expropriation and by increasing fighting strength. Economic prosperity, as a result, is a function of equilibrium conflict prevalence determined not just by a region’s own resources but also by the resources of its neighbors. Using high-resolution spatial data on resources, conflicts, and nighttime illumination across the whole of sub- Saharan Africa, we find evidence confirming each of the model’s predictions. Structural estimates of the model reveal that conflict equilibria are more prevalent where institutional quality (measured by, e.g., risk of expropriation, property rights, voice and accountability) is worse.