Culture, Economic Shocks and Conflict: Does trust moderate the effect of price shocks on conflict?

Abstract

This paper documents an important channel through which culture may affect conflict. We examine a panel of developing countries over fifty years and use price shocks to extractive commodities as an exogenous variation in the country’s economic outlook. We find that these price shocks are less likely to result in the onset of civil war and conflict in countries that have higher levels of trust. However, we also find that trust does not moderate price shocks’ effect on the cessation of conflict. Our study provides new empirical evidence on the interdependence of economic shocks and culture on conflict.