Does poverty cause conflict? Isolating the causal origins of the conflict trap

Abstract

Does poverty cause civil conflict? A considerable literature seeks to answer this question, yet concerns about reverse causality threaten the validity of extant conclusions. To estimate the impact of poverty on conflict and to determine whether the relationship between them is causal, it is necessary to identify a source of exogenous variation in poverty. We do this by introducing a robust instrument for poverty: a time-varying measure of international inequalities. We draw upon existing theories about the structural position of a country in the international economic network—specifically, the expectation that countries in the core tend to be wealthier and those on the periphery struggle to develop. This instrument is plausibly exogenous and satisfies the exclusion restriction, which suggests that it affects conflict only through its influence upon poverty. Instrumental variables probit regression is employed to demonstrate that the impact of poverty upon conflict appears to be causal.