Food Price Uncertainty and Political Conflict

• DOI: http://doi.org/10.1111/infi.12073
• Published date: 01 December 2015
• Date: 01 December 2015

Food Price Uncertainty and

Political Conflict

John O’Trakoun

US Government Accountability Office, Washington, DC.

Abstract

Waves of concurrent, cross-country political turmoil suggest that global

economic forces can serve as a catalyst for intrastate conflict. This article

analyses the role of uncertainty shocks to globalfood commodity prices in

generating political conflict in developing countries. I build a simple

model to show that shocks to the uncertainty of commodity export prices

can elicit civil conflict in a small open economy. Econometric evidence

from a cross-country panel data set documenting intrastate civil conflict

and global food commodity prices from 1966–90 lends support to this

hypothesis. The results suggest that policies which reduce the uncertainty

of export prices faced by food commodity exporters can facilitate political

stability in conflict-vulnerable countries.

The views and opinions ex pressed in this article are th ose of the author and do not reflect the

position of the GAO, nor any other age ncy of the US governm ent. The author wishe s to thank Fabio

Ghironi, Christopher Baum, Robert Murphy, seminar par ticipants at Boston College, G AO, and the

International Political Economy So ciety and reviewers at Intern ational Finance for helpful comments

and suggestions.

International Finance 18:3, 2015: pp. 299–320

DOI: 10.1111/infi.12073

© 2015 John Wiley & Sons Ltd

I. Introduction

Concurrent cross-country political change, such as the 2010–12 ‘Arab spring’

revolutions in the Middle E ast, the experie nce of South American military dictator-

ships in the 1970s and 1980s, and political transition in former Soviet-bloc countries

at the end of the Cold War, suggests that glob al forces impacting mult iple countries

can serve as a trigger for i ntrastate conflict. A common conjecture is that economic

forces, and in particular global agricultural commodity prices, have been a

primary impetus for such episodes. For example, The Economist newspaper on

26 February 2011 argued that ‘Di scontent over rising bread prices has played a part

in the popular uprisings th roughout the Middle East’, and on 28 May 2011 noted

that ‘Rising prices can caus e mayhem. In some African markets maize and wh eat

prices have risen by 30% this year. Political tens ion invariably rises, too’.

This article ar gues that focusing on the imp act of price-level shocks on political

conflict misses an important channe l through which global food price dy namics can

affect intrastate c ivil conflict events. I show that sh ocks to the uncertainty of food

commodity export prices c an cause civil conflict in d eveloping countries. When a

country is an expor ter of an agricultural com modity, an increase in uncertainty

regarding futu re relative expor t prices is associated with an i ncreased risk of

political conflict, while decreases in export price levels have the same effect.

Econometric evide nce supporting t his hypothesis in dicates that in s ome cases, the

uncertainty effect of price s may be more important than the price-level effect.

Identifying deter minants of intrastate conflict is of interest to social scientists

because few events have as dramatic an impact on human well-being as political

conflict. As documented by the rich body of literature on the subject, conflict has

been linked to a host of adverse outcomes for economic de velopment, such as: lower

economic growth and financial market instability (Abadie and Gardeazabal 2003;

Kang and Meernik 2005), deterioration of public health (Ghobarah et al. 2004),

distortions to investm ent behaviour (Guidolin and Ferrara 2 010) and decline in the

quality of legal institutions (Svensson 1998). This has motivated many scholars to

attempt to identify t he role that economic shocks ca n play in causing conflict

(Miguel et al. 2004; Koubi et al. 2012; Hull and Imai 2013; Nunn and Qian 2014).

Among this line of inqui ry, many have established a relationshi p between fluctua-

tions in commodity price l evels and conflict incidence (Besley and Persson 2008;

Elbadawi and Hegre 2008; Guenther 2008; Br€

uckner and Ciccone 2010; Arezki and

Br€

uckner 2011; Lagi et al. 2011; D’Souza and Jolliffe 2012; Dube and Vargas 2013).

Despite a large amount of evide nce showing that commodit y price level shocks

can cause politica l turmoil, there has been l imited research measuri ng the interac-

tion between commodi ty price uncert ainty and the incidence of civil conflict in

developing economies. Previous authors conducting related investigations, such as

Elbadawi and Hegre (2008), have found no robust effects of price uncertainty on the

incidence of civil conflict, which is at odds with econometri c and experimental

300 John O’Trakoun

© 2015 John Wiley & Sons Ltd