Rohner, Dominic; Thoenig, Mathias; Zilibotti, Fabrizio - 2011
We construct a dynamic theory of civil conflict hinging on inter-ethnic trust and trade. The model economy is … inhabitated by two ethnic groups. Inter-ethnic trade requires imperfectly observed bilateral investments and one group has to form … beliefs on the average propensity to trade of the other group. Since conflict disrupts trade, the onset of a conflict signals …