As oil extraction is capital-intensive, increases in the price of oil are likely to have relatively muted wage effects, while they would increase the return to predation activities. That is different to the effect of price changes of agricultural commodities which are produced and/or consumed by the households and which directly affect their real income but not the returns to predation. Using a 2x2 Hecksher-Ohlin model, Dal Bó and Dal Bó (2011) show these contrasting effects of price changes of labor vis-à-vis capital intensive commodities on the incentive to fight. In the empirical analysis we use exogenous changes in the value of the oil production (relative to the local economy) to test for this ‘rapacity’ effect of oil prices on conflict.

The ‘prize’ mechanism is part of the explanation for the eruption and/or the escalation of violence in many modern conflicts. The evidence in support of the prize effect of point-source commodity prices is more robust within countries (Maydstadt et al., 2014; Dube and Vargas, 2013; Bellows and Miguel, 2009) than across them (Lin and Michaels, 2014 vis-à-vis Cotet and Tsui, 2013 and Bazzi and Blattman, 2014). One reason for these mixed results could be that increases in the value of disputable resources can also generate higher fiscal revenues. The state could use these revenues to strengthen its military capacity to repress rebel groups’ activities and/or to buy off support, thus favoring political stability. These contrasting effects of point-source commodities may be difficult to disentangle, especially across countries.

In order to test for the importance of this mechanism in Nigeria, we exploit the timing of the amnesty and DDRR program for the Niger Delta militants. This agreement represents a marked shift in the government’s policy vis-à-vis the militant groups. Up to that point the counterinsurgency strategy had mainly consisted of military repression, most notably through the creation of the Joint Task Force (JTF), composed of troops of the army, navy, air force and the mobile police. However reports suggest that the deployment of the JTF was ineffective at quelling the violence and in fact may have even escalated the conflict as some military took part in the illicit oil trade and reports of extortion, rape, and intimidation of the populace by the security forces strengthened the armed groups’ recruitment (Rosenau et al., 2009; Asuni, 2009). We test for a change in relation between the oil price variable and conflict after the introduction of the new policy in 2009, which shifted the use of part of the oil revenues from funding armed repression to funding the program for the rehabilitation and reintegration of the militants.<sup>11</sup>

# **4. Data and variables**

The data on conflict used in this study are from Version 4 (1997 – 2013) of the ACLED (Armed Conflict Location & Event Data Project). ACLED Version 4 data cover all countries on the African continent from 1997. ACLED definitions mainly concern actors and events. ACLED collects and codes reports from the developing world on civil and communal conflicts, militia interactions, violence against civilians, rioting, and protesting. ACLED covers both activity that occurs within and outside the context of a civil war. For each conflict event, the data contain

> 11 The reintegration package includes a temporary government stipend for individual ex-militants as well as relevant training in existing businesses and formal education, which should provide the tools for the individuals to transition to the labor market. Concerns remain on the extent to which the program has been successful in enabling this transition.

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