The lagged structure of the export variable ensures the exogeneity of the weights.<sup>16</sup> In addition, the moving average weights can capture changes in the export structure such as large discoveries of oil or gas, as opposed to static weights (Deaton, 1995). To compute the weights we construct exports and imports series for the 1962-2010 period at 4-digit (SITC Rev. 2) level by combining the NBER-United Nations Trade data with data from UN Comtrade. This standard formulation allows the effects of commodity prices on countries to vary according to the commodity’s share in a country’s export bundle.

In the baseline specification we use “slow moving weights”, defined as the average exports of each commodity from (t-2) to (t-12). Lagged averages of ten years of data ensure a balance between the time invariant weights and “fast moving weights” (t-2 to t- 4) used by B-B. This weighting scheme also allows us to control for changes in the export structure without giving excessive weight to changes of the export structure due to temporary shocks.<sup>17</sup> Two other differences in our index compared to what B-B use are important. First, the index in B-B is based on percentage changes in the commodities’ price. In fact, we argue that it is the price level rather than its proportionate change over the previous period that matters most in shaping the incentives to engage in violence. Consider for instance a change in the price of oil for an oil-exporting country. During periods of low international prices, even a large percentage change in price in one period may be associated with a low price level at the end of the period. In this case the value of the oil vulnerable to predation would still be limited, thus keeping the incentives for fighting over its control relatively low.<sup>18</sup> We therefore believe that our price index is more suited to capture changes in the incentives to engage in conflict due to commodity price changes. This approach is also in line with other recent studies, for example Nunn and Qian (2013) and Dube and Vargas (2013). As it turns out, this difference is important for the results.

Second, our baseline index is not scaled by size of the exported commodities compared to GDP. This is, in principle, a desirable property of such an index (B-B reflect the size of exports relative to GDP by multiplying the index by the commodity exports-GDP ratio at the mid-point of the period). Using this scaling does not affect our results in any meaningful way, but it does slightly reduce the number of observations, as GDP is not available for a few countries (results available upon request).<sup>19</sup> In addition to the export price indices, we develop a similar country-specific variable for the import sector:

> 16 For example commodity exports could react in anticipation of a conflict or as a reaction to changes in international commodity prices themselves, thus making the contemporaneous export shares invalid as weights.

> 17 One important concern comes from the fact that some countries are large exporters of these commodities and their internal conditions may influence international prices. We address this issue in the next sections. 18 In the model of Dal Bó and Dal Bó (2011) this would lead to a relatively small size of the appropriative conflict sector, i.e. a low probability of conflict.

> conflict sector, i.e. a low probability of conflict. 1 19 e i ∑ei i <u>,</u> ∑e The index scaled by export-GDP ratio is defined as: i ee ,tt−kk × � G ee mmiim mmiimmtt ~~��~~ ii mmi ,tt−kk PPxx = �∏PPjj jjii GGmmiim mmiimmtt

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