Diamonds and violence in Africa. Uncovering relationships and mechanisms

This paper investigates whether an increase in the international price of diamonds impacts violent activity in African countries that are diamond abundant and if so, through which mechanism(s). It concludes that an increase in the diamond price is positively related to violence in countries abundant in primary diamonds, but unrelated to violence in countries with secondary diamonds. This result makes it possible to distinguish between two potential theoetical mechanisms connecting resources and violence: insecure property rights raising the returns to conflict and the wage rate changing the opportunity costs of conflict. The findings support the latter, but not the former. Results are robust to using different diamond prices, instrumenting for diamond price and controlling for cyclical effects, but no to controlling for the presence of other resources.