Abstract
Violent political conflict has been documented to have comprehensive adverse effects on economic activity and, thus, substantially harm social welfare. As conflict escalations are often reported to fragment economic space, we suggest an empirical framework which allows for estimating changes in the size of markets often split by frontlines. This approach uses a differentiated goods oligopoly model to separate effects of conflict intensity on consumer demand, costs of trade, market size, and market structure. We combine daily sales of apples in Hebron - one of the focal points of the Israeli–Palestinian conflict - and variables quantifying complementary aspects of conflict intensity. Conflict is found to suppress demand and affect competition more significantly than it increases costs of trading. Simulations indicate a 15% reduction in total daily consumption during conflict of high intensity while a pacification would yield a 20% welfare gain. This empirical framework allows disentangling the effects of conflict on food markets. The results suggest that relief policies should consider alleviating effects of fragmentation of economic space, e.g., by ensuring humanitarian corridors.
Highlights
Violent political conflict is a widespread phenomenon in the developing world (World Bank 2011). Blattman and Miguel (2010) comprehensively review the state of the art of researchElectronic supplementary material The online version of this article contains supplementary material, which is available to authorized users.Existing research, such as the one conducted, for example, in the framework of Microcon (2018), takes a broad and interdisciplinary social-science perspective without zooming in on food markets in particular
We focus on analysing consequences of conflict on economic and physical access to food, that is, the second dimension of food security (EC-FAO 2008, p. 1)
A limited number of studies have started to focus on the micro-economic effects of conflict on food markets
Summary
Violent political conflict is a widespread phenomenon in the developing world (World Bank 2011). Blattman and Miguel (2010) comprehensively review the state of the art of research. We contribute to closing this gap by disentangling the effects of violent conflict into four aspects of which one of them is changes in market size This aspect is of great importance as movement restrictions and physical threats often fragment markets by preventing market access in areas subject to escalations of political violence (WFP 2009; UNCTAD 2014). Conflict provides an excellent exogenous mechanism by which supply behaviour can be identified This decomposition into various components facilitates comprehending and quantifying economic consequences of violent conflict on food markets as well as informing relief missions carried out by local or international organizations. This main text presents key aspects in order to hold the analysis concise.
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