Commodity Price Shocks, Conflict and Growth: The Role of Institutional Quality and Political Violence

Abstract

This analysis empirically investigates the relationships between resource windfalls, political regimes, conflict and economic growth using recent advances in panel estimation methods and a distinctive commodity price shock measurement. The paper clarifies many of the ambiguous outcomes of the existing literature, particularly showing that resource windfalls have significant impact on conflict only in politically unstable autocracies, which itself is heterogeneous in the response conditional on a country’s initial political violence level. The findings also demonstrate that resource shocks are positively associated with economic performance in democracies and in politically stable autocracies, while significantly deteriorating growth for politically unstable autocracies