Labor intensity, market structure, and the effect of economic activities on civil conflict

Abstract

Some types of economic activities exacerbate civil conflict while others mitigate it, but there is little systematic evidence on how characteristics of an activity determine its effect on conflict. We provide such evidence by analyzing how movements in the prices of 26 agricultural commodities, comprising 84 percent of total agricultural output, affect conflict in the Philippines. We find that increases in the value of labor-intensive commodities lead to larger reductions (or smaller increases) in conflict, consistent with an opportunity cost mechanism. Increases in the value of commodities produced by a small number of large farms lead to larger increases (or smaller reductions) in conflict, consistent with the hypothesis that concentrated markets are more easily taxed by armed groups. Our approach allows us to quantify the trade-off between different characteristics of an economic activity, providing guidelines on the types of activities a conflict-sensitive development strategy can safely promote.