2014; Dube and Vargas, 2013; Maydstadt et al., 2014), while the cross-country evidence is more mixed. Unlike Besley and Burgess (2008), B-B find particularly little support for the idea of the state as a ‘prize’: in their analysis prices of extractive commodities have a weakly negative effect on the risk and duration of conflict. The authors interpret this finding as providing mild support for the state deterrence mechanism via changes in fiscal revenues. Using a slightly revised methodology, as we explain below, our analysis revisits this evidence, bringing it in line with the within-country evidence.

On the other hand, prices of diffused agricultural commodities should be more linked to the opportunity cost hypothesis, as their production is labor intensive and more difficult for the government to tax. Therefore, positive shocks to these exports should reduce the incentives for conflict. However, revenues from diffused commodities (as well as from mining activities) can also be an important source of funding for rebel groups controlling local areas. For example, in Myanmar the production and trade of timber and other agricultural products, as well as of mining products in the bordering areas with Thailand and China, was taxed by local rebel groups fighting the central government.<sup>5</sup> This channel would go in the opposite direction to the opportunity cost channel, and their net effect would be an empirical question. In the case of the Colombian conflict the opportunity cost channel appears to be dominant for crops such as coffee, bananas and other legal agricultural crops (Dube and Vargas, 2013; Berman and Couttenier, 2014), while the rebel funding mechanism is more important for coca production (Angrist and Kugler, 2008).

In addition to generating revenues, commodities can also be significant consumption items, which can be important in determining the impact on conflict. A positive price shock can favor producers but it can also penalize consumers, sparking unrest. Bellemare (2014) provides some support for this relationship by linking monthly spikes in international food prices with increased political unrest worldwide. Our analysis also distinguishes between consumed and non-consumed commodities, which to the best of our knowledge is an innovation in the literature.

The macro literature has paid less attention to the impact of shocks in import prices on conflict. Nevertheless, swings in the international prices of imported commodities could affect consumers as much as prices of exported commodities affect producers. As the prices of commodities tend to be correlated, failure to include imported commodities’ prices may lead to a bias in the measurement of the effect of the prices of exported commodities. Cross-country studies find some support for the conflict-inducing effects of increases in the international prices of imported food commodities (Arezki and Bruckner, 2011; Besley and Persson, 2008; Maydstadt et al, 2012).<sup>6</sup> In line with these findings, our analysis considers also the impact of the price of imported commodities on conflict. We are also aware of the limitations of this variable in capturing the impact on conflict via

> 5 This information is based on the report by Kesan (2012) as well as personal communications with the main author of the report.

> 6 Besley and Persson (2008) interpret this finding as supportive of a grievance mechanism, i.e. spikes in food prices increases poverty and grievances. This is essentially analogous to the association of a price increase to the reduction in real wage and thus in the opportunity cost of engaging in conflict.

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