The Blessings of Security: Economic Consequences of Conflict

Andrew Wallen

Advisor: John V.C. Nye, PhD, Department of Economics

Committee Members: Thomas Stratmann, Omar Al-Ubaydli, Carlos D. Ramirez

Carow Hall, Conference Room
May 23, 2011, 06:00 AM to 07:00 AM


Obvious effects from intra-state conflict include the death of those swept up in the conflict and the destruction of physical capital. Perhaps less obvious is the damage done to trade and the distortion of resource expenditures away from their peacetime efficient uses. This dissertation addresses these less obvious results of conflict. The findings support the idea that an increase in violence causes a decrease in market integration. Similarly supported is the idea that a weakening of the state’s ability to enforce property rights yields a drop in the percent of household expenditures on durable goods as a percent of total expenditures. A modified Diamond (1987) model allowed for the prediction that when there are close substitutes with consistent price differentiation, the high priced good will increase in price while the low priced good will not change in price as a result of violence. While this prediction may be supportable with better market information, price data from Iraq did not provide support. The ideas in this dissertation could have application beyond war to, for example, high crime areas. That being said, within the context of this paper the discussion is intended to address the type of conflict found in insurgency, or civil war.