Conflict Diamonds

Abstract

’Conflict diamonds’ refers to the fatal role that diamonds are believed to have played in several African conflicts. The article analyzes the impact of diamond abundance on economic growth in light of the broader, previously discovered empirical finding of a ’curse of natural resources’. By extending the theory of appropriative conflict, a predator-prey game is outlined in which a rebel chooses between peaceful production and predation on natural resources controlled by the ruler. It is shown that whereas an increase in natural resources might increase the ruler’s public utility investments, it might also lead to a crowding-out in favor of defense spendings, which depresses growth. As predicted by the model, a cross-country regression analysis suggests that diamond abundance has a ’U-shaped’ relationship with economic growth.