Public Policy, Price Shocks, and Civil War in Developing Countries

Date Published:

Abstract:

Those who study the role of agriculture in the political economy of development focus on government policy choices on the one hand and the impact of price shocks on the other. We argue that the two should be studied together. We nd that civil unrest (Granger) causes government policies, pushing governments in poor and medium income countries to shift relative prices in favor of urban consumers. We also nd that while civil wars are related to food price shocks, when government policy choices are taken into account, the relationship disappears. We thus learn two things: Policies that placate urban consumers may in ict economic costs on governments, but they confer political benets. And when estimating the relationship between price shocks and political stability, equations that omit the policy response of governments are misspecied.

Notes:

Co-author Brett L. Carter is a PhD candidate in the Department of Government at Harvard University.