Discussion Paper Details

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Title: Oil Price Shocks and Conflict Escalation: Onshore vs. Offshore

Author(s): Jørgen Juel Andersen, Frode Martin Nordvik and Andrea Tesei

Publication Date: August 2021

Keyword(s): conflict and Natural resources

Programme Area(s): Development Economics and Macroeconomics and Growth

Abstract: We reconsider the relationship between oil and conflict, focusing on the location of oil resources. In a panel of 132 countries over the period 1962-2009, we show that oil windfalls escalate conflict in onshore-rich countries, while they de-escalate conflict in offshore-rich countries. We use a model to illustrate how these opposite effects can be explained by a fighting capacity mechanism, whereby the government can use offshore oil income to increase its fighting capacity, while onshore oil may be looted by oppositional groups to finance a rebellion. We provide empirical evidence supporting this interpretation: we find that oil price windfalls increase both the number and strength of active rebel groups in onshore-rich countries, while they strengthen the government in offshore-rich ones.

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Bibliographic Reference

Juel Andersen, J, Nordvik, F and Tesei, A. 2021. 'Oil Price Shocks and Conflict Escalation: Onshore vs. Offshore'. London, Centre for Economic Policy Research.