Essays in economic development and conflict

My dissertation consists of three chapters dealing with issues related to economic development and conflict. The first and second chapters discuss military expenditures and inequality from global and regional perspectives. The third chapter focuses on the impact of wars on relative wages in the food sector. In the first chapter we show that a substantial body of literature has uncovered a robust relationship between institutions-including unionization and political democracy- and economic inequality. This first chapter examines the effect of military spending on inequality controlling for the size of armed forces, GDP growth, per capita income and other possible determinants. Using a panel regression with country level observations from 1987-1997, we obtained consistent estimates that there is a positive effect of military expenditure on pay inequality. This relationship is robust across variable definitions and model specification. Given the close relationship between pay and income this result suggests that a country’s reduction in military spending could reduce income inequality. Studying the inequality of the Middle East and North African (MENA) countries provides an opportunity to assess factors that shape the countries’ suc- cess in distributing the wealth by looking beyond simple measures of wealth creation. This second chapter examines two issues presented in the first chapter with more emphasis on the regional dynamics. The empirical results indicate that again the military spending has strong and positive effect on inequality. A systematic reduction in military spending could reduce the level of inequality since it frees resources for other social and economic development programs. The final chapter introduces a new perspective in considering the impact of wars on relative wages in the food sector. In a state of war people are at risk of losing one of their most basic rights — food. Millions may live in the shadow of famine and poverty. Micro-level analyses of "food-cost ratio" during civil or international wars give us insight into governments’ ability, or inability to mobilize the resources to counter the danger of hunger and famine. Understanding the factors that make the food-cost ratio rise may help to formulate policy responses that mitigate human suffering in wartime environments. Therefore, this paper examines two questions: first, the effect of wars on the food-cost ratio; second, what are policies likely reduce the food-cost ratio? To answer these research questions we use panel data for 50 countries from the 1960s to the 1990s. The results of this paper will show that civil wars positively affect the food-cost ratio, while international wars apparently do not. The policy implication of this analysis is that in the event of a civil war, policy makers lack the resources to exert control on rising food-cost ratio. A rise in the food-cost ratio could be translated into higher food prices or lower purchasing power over food, either of which may havedevastating impacts on social and economic well-being. In the event of an international war, as opposed to civil war, governments have a greater capacity to prioritize and mobilize resources. Food imports remain an effective tool to reduce the rise in the food-cost ratio.