Aclmowledgmerıts About the Author A bbreuiations ix xi xiii Overview Introduction Main Rcsults Policy Directions Notes References l 1 2 4 (i 7 Chaptcr l Chapter 2 How Trade Can Affcct Conflict Conditions That Affect the Impact of Trade Shocks on Conflict Introduction Grievances lnstitutional Capacity and Inclusiverıess Conditiorıs in Neighboring Countries Transmission of Prices to Domestic Markets Cross-Country Empirical Tests Testing for the lmportance of Heterogeneity in the Nigcrian Conflict Heterogeneity in the Israeli-Palestinian Conflict Notes References Trading Away from Conflict • http://dx.doi.org/10.1596/978-1-4648-0308-6 9 Introduction 9 Trade Flows in Fragile Countries Are Different 12 Why Changes in Trade Flows May Affect Contlict 18 Cross-Country Evidcnce on Trade Shocks and Contlict 25 Evidence from Nigerian States (2004-13) 34 Evidence from the Israeli-Palestmian Contlict (2000-04) 42 No~s 51 Refererıces 54 59 59 61 63 65 65 66 72 73 73 75 V vi Contents Chapter 3 How Trade Policy Could Ease Terısiorıs in Fragilc Courıtries Trade Policies in Fragile Countrics Must Takc into Account the Implications for Conflict Manage Receipts fi-om Comrnodity Exports in a Conflict-Serısitivc Way Protcct Producers, Consumers, and Workers fi-om Adverse Trade Shocks Promotc Trade with Ncighbors Support Labor-lntensive Exports Build Long-Term Contlict Resilicnce Notes References Appendix A Data Issues Apperıdix B Estimation Methodology and Empirical Results 79 80 81 85 86 86 87 88 89 93 109 Boxes 1.1 Which Are the Fragile Countries? 12 1.2 Empirical Issues in the Early Literature on the Relationship between Changes in lncome and Conflict 26 1.3 The South Sudanese Civi] War: Was Oil Export the Trigger7 28 ( l .4 Correcting for Endogeneity When Mcasuring the Rclationship between Conflict and Trade under RTAs 30 l.5 The Literature on the Israeli-Palestinian Contlict and thc Opportunity Cost of Violerıce 43 Figures 0.1 Most of the Poor Will Soon Be in Fragile Countries 2 1.1 Trade Reprcsents the Major Sourcc of Forcign Exchange in Fragile States 13 1.2 Share of Largest Exports in SelecteJ Fragile Countries and Territories (in 2010) 14 1.3 For Many Fragile States, Exports Are Not Heavily Diversii-ıeJ 15 1.4 For Fragile Statcs, Net Food Imports Constitute a Higher Percentage of GDP 16 1.5 Fragile Countries Perform Worse Than Their Peers in Tradc FaciLtation and the Gap Is Growing 17 l.6 Mapping the Linkages betwcen Changes in Trade Flows and Civil Contlict 19 l. 7 Palestinian Exports to the World and to lsrael, 1996-2000 44 1.8 Distribution of Changcs in Palestinian Exports (1996-99) 45 1.9 Palcstinians Killcd by lsracl in the West Bank and Gaza, 2000-04 46 Trading Away from Conflict • http://dx.doi.org/10.1596/978-1-4648-0308-6 Contents vii 1.1 O 2. 1 B 1 Isracli Imports [rom China and thc West Bank and Gaza, 1 ~)95-2000 Marginal Effects of Px Across the Rangc of lnteraction Variables' Values Changes in lsraeli MFN Tarifts (5-digit SITC Rcv. 3), 1993-2004 Maps ı.ı 1.2 1.3 Tables 1 .1 1.2 2.J 2.2 ı\. l A.2 ı\.3 A.4 A.5 ı\.6 A.7 B.l 13.2 B.3 B.4 B.5 B.6 B.7 B.8 13.9 The Geography of Corıflict in Nigeria (2004-13) Conflict lntcnsity across States in Nigcria Violencc lntcnsity across States in Nigeria l'ragilc Countries' Exports Are Less Diversıfied Than Other Dcvcloping Countrics' Exports Classification of thc Export Cornrnodities (with Exarnple) Under What Conditiorıs Are the Marginal Eflects of 'Trade Shocks Not Significant? Lebanon Has a Higher Risk of Conflict frorn Hydrocarbons Exports than the Average Country Fragile Countries and Territories and Number of Battle Deaths Surnrnary Statistics, Cross-Country Analysis lntcraction Variablcs for the Cross-Country Arıalysis Household Per Capita Expenditure on Food and Nonfood by Zonc Sumrnary Statistics of the Regrcssors (2004-11) Summary Statistics for Key Variables in the Israeli-Palestinian Contlict Study Description of Variablcs Used in the Palestinian Case Study The lrnpact of lrade on Conflict, Cross-Country Analysis Robustncss with Fast-Moving, Country-Specitıc Time Trends, Cross-Country Analysis Robustness for Price Makers and Conflict Data Source, Cross-Country Analysis Splitting the Cornmodities' Variables into Diffcrent Types, Cross-Country Analysis The lrnpact otlrade Variablcs on the Likelihood of Conflict Corning to an End, Cross-Country Analysis The lmpact ofTrade on Battlc Deaths, Cross-Country Analysis Thc Effcct of Trading with Ncighbors on Contlict, Rcvisited, Cross-Country Analysis Trade Variables without Lag Structure, Cross-Country Analysis Sumrnary Statistics of thc Dcpendent Variable (2004-l l ), Nigeria Trading Away from Conflict • http://dx.doi.org/10.1596/978- 1-4648-0308-6 49 70 127 36 36 37 14 21 69 71 93 97 97 101 l Ol 103 104 112 113 113 114 115 11 G 117 118 119 viii B.lO B.11 B.12 B.13 B.14 B.15 13.16 B.17 B.18 G.19 B.20 B.21 Contents The Impact of Price Shocks on Contlict Events in Nigeria (2004-11) 121 The Irnpact of Price Shocks on Contlict in Nigeria (2004-11), Robustness 122 The Impact of Price Shocks on Various Typcs of Conrlict in Nigeria (2004-11) 123 Mediating Factors Affecting the Impact of Price Shocks on Contlict l 24 The Irnpact of Changes in Tradc Prices on the Boko Haram Conflict(2010-l3) 125 The lmpact of Palestinian Exports on Conflict lntcnsity 129 The Irnpact of Palestiniarı Trade on Conflict lntensity 130 The Irnpact of Palestinian Trade ona Dıfferent Measure of Contlict Intensity 131 The lmpact of Palestinian Trade on Contlict Probability 13 l The lmpact of Palestiniarı Trade on Conflict: Tackling Endogeneity 132 The Heterogeneity of the Irnpact of Export Changes on Conflict lntensity 132 lnstrumenting Palestinian Exports through Exogenous Shocks 133