S. Mansoob Murshed

Conflict, Civil War and Underdevelopment: An Introduction:

Conflict has been a feature of human society since time immemorial. Disputes that arise may be organized around social class, ethnicity, religion, region, or some combination of these factors. The struggle can be over economic opportunities, as well as political and civil rights, among other contestable factors. In peaceful societies, conflict is channelled into nonviolent means and institutions for both its expression and resolution. Civil war is not necessarily irrational, but a product of certain objectives, therefore amenable to rational-choice analysis. In low-income countries, civil war makes poverty reduction and growth difficult to achieve. Many contemporary civil wars have an ethnic dimension, as ethnicity is a strong uniting force. Grievances, therefore, play a major part in contemporary conflict, but greed - the desire to control resources and capture rents - also enters into the calculus of conflict. Ultimately, open warfare cannot emerge inside a society with a functioning social contract, as greed and grievances are managed and conflict is contained in countries with properly operating institutions. Consequently, conflict resolution requires the reconstitution of the social contract.

Aid Conditionality and Military Expenditure Reduction in Developing Countries: Models of Asymmetric Information

This paper analyzes problems of implementing noneconomic conditionality, such as military expenditure reduction, in the granting of foreign aid given the presence of asymmetric information. The authors present two conceptually separate principal-agent models to capture the stylized facts of multilateral and bilateral aid negotiations respectively. The first model is an application of the problem of adverse selection when there is more than one type of principal (donor) with varying objectives. The second model extends moral hazard to double moral hazard, where neither principal nor agent (recipient) can fully observe or verify each others strategies. Copyright 1995 by Royal Economic Society.

Credibility and Reputation in Peacemaking

This article analyses credibility and reputation in the context of peace negotiations. The model is applicable to the credibility of peace agreements in post-conflict situations in the immediate aftermath of civil war, where there is a danger of conflict breaking out again. The analysis is motivated by the empirical regularity with which peace agreements break down in the context of civil war, as for example in Angola, Sierra Leone and many of the conflicts in the Caucasus region. Where war provides economic gains to one side, peace is not incentive compatible, and peace agreements will necessarily degenerate, as they become time inconsistent. The party that has something to gain from surprise warfare, agreeing to peace but reneging on it, will do so and return to war. The levels of conflict chosen by this group are an increasing function of greed and capturable rents, but decreasing in the direct costs of war. In this context, action by external powers could lower the risk of civil war reigniting. Basically, these involve a greater commitment to peace, induced by policies known as commitment technologies. Sanctions, aid and direct intervention, if effective, could eliminate conflict, as well as help in devising commitment technologies to peace. In a multiple-time framework, uncertainty about the type of the group that may renege on peace generates extra costs in terms of greater fighting, and the key role of the discount rate in trading off present versus future consumption enters the analysis. High discount rates and the impatience to consume at present engender greater conflict.

Debt Relief and Civil War

Reducing or writing off the debts of the 41 heavily indebted poor countries (HIPCs) can potentially reduce social conflict by releasing resources from debt-service to enable governments to make fiscal transfers that lower the grievances of rebels (when conflict is partly rooted in grievances over past allocations of public spending and taxation). To explore these issues, this article presents a model of a civil war between a government and rebels, with both sides maximizing their expected utility from the states of war and peace. The government may accept debt relief but then renege on any promise to donors to use the resources to buy peace and instead keep the resources for itself and raise its military capability. The outcome that prevails depends on which party (peace or war) has the greatest influence on the government of the day. Unfortunately, even if debt relief is forthcoming, the fiscal system may be so institutionally weak that it cannot achieve the promised transfer. Also, the rebel leaders may capture most of the fiscal transfer, leaving the grievances of their followers to ferment into further conflict. And a transfer that could have prevented conflict may be insufficient to stop a war once it begins. The international community has only limited influence over these problems. But the international community can change the modality of debt relief itself so that peace-seeking governments can receive faster debt relief, thereby at least ensuring that peace is not delayed by the inevitable difficulties that wartime governments face in meeting donor policy conditionality.

PATTERNS OF EAST ASIAN TRADE AND INTRA-INDUSTRY TRADE IN MANUFACTURES

This article examines trade patterns for seven East Asian economies: Malaysia, Singapore, Thailand, Indonesia, the Philippines, South Korea and Hong Kong, with partners in other Asian countries and the West. East Asia as a dynamically growing region has gained manufacturing competitiveness as it converges towards income levels in the West. The article focuses mainly, but not exclusively, on intra-industrytrade (IIT). Measures of IIT provide clues as to the nature of trade-induced adjustments on the economy. East Asian economies do appear to have gained in manufacturing competitiveness, a trend which is not just confined to unskilled labourintensive goods.

Post-Conflict Reconstruction in Africa: Some Analytical Issues

In contrast to much of the twentieth century, when warfare between rich states was the norm, contemporary conflict now occurs almost exclusively in poor developing countries and is mainly internal in nature (although external parties and neighbouring countries may support internal belligerents). The period 1990–2000 saw nineteen major armed conflicts in Africa, ranging from civil wars to the 1998–2000 war between Eritrea and Ethiopia (Wallensteen and Sollenberg, 2001). Although the picture is grim, there has recently been some good news: a peace agreement has been signed in Angola; the governments of the Democratic Republic of the Congo (DRC) and Rwanda have signed a peace agreement; talks have resumed between the government and the rebels in Sudan. Sadly, these positive developments need to be counterbalanced with the empirical regularity with which peace agreements break down (Walter, 2001). Ensuring that the benefits of reconstruction are broad-based rather than narrow in their benefits, it is important to minimize the chances of conflict reigniting, since grievances will otherwise fester. Accordingly, the containment and reduction of inequality, and not just a reduction in absolute poverty, may be central to broad-based reconstruction.

Reconstructing and Reforming the Financial System in Conflict and 'Post-Conflict' Economies

Reconstructing the financial system in countries affected by violent conflict is crucial to successful and broad-based recovery. Particularly important tasks include: currency reform, rebuilding (or creating) central banks, revitalising the banking sector, and strengthening prudential supervision and regulation. Encouragement of private capital into the banking sector must be balanced by protection of the public interest, a task made more difficult by the nature of war-to-peace transition. Bank crises can destabilise economies in recovery from war, and their fiscal burden takes resources away from development and poverty spending – thereby threatening ‘post-conflict’ reconstruction itself.

Quantitative Restrictions On The Flow Of Narcotics: Supply And Demand Restraints In A North-South Macro-Model

This paper constructs a macroeconomic model of North–South interaction where the flow of narcotics from the South to the North is restricted. The economic effects are akin to quantitative restrictions in trade policy. Two alternative policy scenarios will be considered. One involves reducing the supply of drugs at the source, accompanied by aid. Supply‐side restrictions have negative aggregate supply‐side effects in the producing region, because of the monopoly rents generated from that type of control. This makes them a second‐best policy, particularly if the accompanying aid is not used for poverty alleviation and fails to expand domestic aggregate demand. Alternatively, demand side restrictions will be found to be superior.

Does Trade With the South Disadvantage Unskilled Workers in the North

A theoretical macroeconomic model of North-South interaction is constructed to examine the impact of inter-regional trade on unskilled wages in the North. The model allows for process innovation in the form of RD both skilled and unskilled labour inputs enter into Northern production; real wages could be fixed by institutional considerations; and trade policy initiated by both regions is analyzed. It is not trade with the South, perse, which hurts unskilled labor in the North, but the nature of labor market imperfections and the process of technical change.

Import quotas or VERs to protect domestic industry? A three country general equilibrium model

Abstract Given the growing practical importance of Voluntary Exports Restrictions (VERs), this paper follows recent work by using a perfectly competitive three country model but introduces a market structure where all three countries produce non-homogeneous versions of one good, which is then the target for trade-restricting policy. This innovation leads to new results on the relative effects of VERs and quotas which are designed to increase domestic production of the import-competing good.