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Title:Explaining conflict in low-income countries : incomplete contracting in the shadow of the future PDF Logo
Authors:McBride, Michael
Skaperdas, Stergios
Issue Date:2005
Series/Report no.:CESifo working papers 1636
Abstract:We examine two factors that help explain the prevalence of conflict in low-income countries: that adversaries cannot enforce long-term contracts in arms, and that open conflict alters the future strategic positions of the adversaries differently than does peace. Using an infinite horizon model, we show the conditions under which adversaries will not be able to sustain short-term contracts even though doing so is Pareto superior to open conflict. Conflict arises because adversaries attempt to gain future strategic supremacy that only victory in conflict brings. Lower incomes or wages, as well as higher discount factors and the less destructive conflict is, the higher is the likelihood of war.
JEL:C70
D74
O10
Document Type:Working Paper
Appears in Collections:CESifo Working Papers, CESifo Group Munich

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