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1 DISCUSSION PAPER SERIES DP11926 DIASPORAS AND CONFLICT Fabio Mariani, Marion Mercier and Thierry Verdier DEVELOPMENT ECONOMICS

2 ISSN DIASPORAS AND CONFLICT Fabio Mariani, Marion Mercier and Thierry Verdier Discussion Paper DP11926 Published 20 March 2017 Subitted 20 March 2017 Centre for Econoic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK Tel: +44 (0) This Discussion Paper is issued under the auspices of the Centre s research prograe in DEVELOPMENT ECONOMICS. Any opinions expressed here are those of the author(s) and not those of the Centre for Econoic Policy Research. Research disseinated by CEPR ay include views on policy, but the Centre itself takes no institutional policy positions. The Centre for Econoic Policy Research was established in 1983 as an educational charity, to proote independent analysis and public discussion of open econoies and the relations aong the. It is pluralist and non-partisan, bringing econoic research to bear on the analysis of ediu- and long-run policy questions. These Discussion Papers often represent preliinary or incoplete work, circulated to encourage discussion and coent. Citation and use of such a paper should take account of its provisional character. Copyright: Fabio Mariani, Marion Mercier and Thierry Verdier

3 DIASPORAS AND CONFLICT Abstract We build a odel of confict in which two groups contest a resource and ust decide on the optial allocation of labor between fighting and productive activities. In this setting, a diaspora eanating fro one of the two groups can get actively involved in the confict by transferring financial resources to its origin country. We find that the diaspora infuences the war outcoe and, above a certain size, contributes to the escalation of violence. Given the characteristics of the confict equilibriu, the two groups of residents prefer to negotiate a peaceful settleent if there exists a sharing rule that akes both of the better off than war. We then identify the characteristics of the econoy such that the diaspora acts as a peace-wrecking force or triggers a transition towards peace. A dynaic version of the odel with an endogenous diaspora allows us to analyze the joint evolution of igration and confict in the hoe country, discuss the role of openness to igration and the possibility of ultiple equilibria, and draw soe policy iplications. JEL Classification: F22, D74, O1 Keywords: Diasporas; Confict; International Migration Fabio Mariani - fabio.ariani@uclouvain.be IRES, Université Catholique de Louvain; IZA. Marion Mercier - arion.ercier@uclouvain.be IRES, Université Catholique de Louvain; DIAL- IRD; IZA Thierry Verdier - verdier@pse.ens.fr Paris School of Econoics and CEPR Acknowledgeents We are thankful to José de Sousa, Frédéric Docquier, David Levine, Gerard Padro i Miquel, Hillel Rapoport, Doinic Rohner and Olivier Sterck for their coents on earlier drafts. We would also like to express our gratitude to seinar participants at ULB (Brussels) and IRES (Louvain-la-Neuve), as well as participants to the PET 2014 in Seattle, SMYE 2015 in Gent, CSAE 2015 conference on \Econoic Developent in Africa" in Oxford, 2nd DIAL Developent Conference in Paris, 2015 ASSET conference in Granada, IMI conference on \The Changing Face of Global Mobility" in Oxford, 2016 International Conference on Migration and Developent in Florence, 2016 EEA { ESEM Congress in Geneva and 28th SIEP Conference in Lecce, for useful and lively discussions. Marion Mercier acknowledges financial support fro the Marie Curie-Sklodowska Research Fellowship Progra of the European Coission (MIGWAR project ). Powered by TCPDF (

4 Diasporas and Conflict Fabio Mariani, Marion Mercier, Thierry Verdier Abstract We build a odel of conflict in which two groups contest a resource and ust decide on the optial allocation of labor between fighting and productive activities. In this setting, a diaspora eanating fro one of the two groups can get actively involved in the conflict by transferring financial resources to its origin country. We find that the diaspora influences the war outcoe and, above a certain size, contributes to the escalation of violence. Given the characteristics of the conflict equilibriu, the two groups of residents prefer to negotiate a peaceful settleent if there exists a sharing rule that akes both of the better off than war. We then identify the characteristics of the econoy such that the diaspora acts as a peace-wrecking force or triggers a transition towards peace. A dynaic version of the odel with an endogenous diaspora allows us to analyze the joint evolution of igration and conflict in the hoe country, discuss the role of openness to igration and the possibility of ultiple equilibria, and draw soe policy iplications. Keywords: Diasporas; Conflict; International Migration. JEL classification: F22; D74; O1. 1 Introduction Poor countries are often plagued by civil wars and, in any cases, source of sizeable igration flows. There is also abundant evidence that diasporas can play a ajor role in the evolution of conflict in the origin country. Through various channels, which range fro political lobbying to Fabio Mariani: IRES, Universit e Catholique de Louvain; IZA. E-ail: fabio.ariani@uclouvain.be Marion Mercier (corresponding author): IRES, Universit e Catholique de Louvain; DIAL IRD; IZA. E-ail: arion.ercier@uclouvain.be Thierry Verdier: PSE and Ecole des Ponts-ParisTech; PUC-Rio and CEPR. E-ail: thierry.verdier@ens.fr We are thankful to Jos e de Sousa, Fr ed eric Docquier, David Levine, Gerard Padro i Miquel, Hillel Rapoport, Doinic Rohner and Olivier Sterck for their coents on earlier drafts. We would also like to express our gratitude to seinar participants at ULB (Brussels) and IRES (Louvain-la-Neuve), as well as participants to the PET 2014 in Seattle, SMYE 2015 in Gent, CSAE 2015 conference on Econoic Developent in Africa in Oxford, 2nd DIAL Developent Conference in Paris, 2015 ASSET conference in Granada, IMI conference on The Changing Face of Global Mobility in Oxford, 2016 International Conference on Migration and Developent in Florence, 2016 EEA ESEM Congress in Geneva and 28th SIEP Conference in Lecce, for useful and lively discussions. Marion Mercier acknowledges financial support fro the Marie Curie-Sklodowska Research Fellowship Progra of the European Coission (MIGWAR project ). 1

5 financial support and direct involveent in fighting, igrants ay act as a peace-building or peacewrecking force. The econoic literature, however, has so far overlooked the relationship between eigration and conflict in the hoeland. In this paper, we contribute to bridging this gap and build a theoretical fraework to understand how diasporas can affect conflict in the origin country. The involveent of diasporas in hoeland conflicts has been docuented by qualitative research in different fields. One of the best known exaples is the Sri Lankan civil war, which opposed the Tail and the Cinhalese between 1983 and During the first phase of the conflict, the Tail diaspora favored the escalation of violence through assive financial support to its group of origin and a relentless lobbying activity aied at obilizing international opinion (Fair, 2007; Gunaratna, 2003; Orjuela, 2008). Siilarly, the Eritrean and Croatian diasporas have played decisive roles in the independence wars of their respective countries of origin, in particular by providing funds for the ared struggle of the secessionist groups (Hockenos, 2003; Fessehatzion, 2005). After the independence, and during and in the afterath of the Ethio-Eritrean conflict ( ), the Eritrean governent even asked the diaspora ebers to contribute 2% of their onthly incoe to the newly fored state (Fessehatzion, 2005). Such contribution was not copulsory, but largely perceived as a duty (Koser, 2007). In the case of Croatia, Skrbiˇs (2000) also notes that financial participation of eigrants was nearly andatory, with diaspora resources being used both for fighting in the hoe country and capaigning in the host countries to seek support and recognition of the new state. Lobbying has also been a defining ode of intervention of the anti-castro Cuban diaspora. Although de facto unsuccessful, the Cuban diaspora strongly affected the US foreign policy and the ability of the political regie in the hoeland to carry on (Grugel and Kippin, 2007). Other notable exaples of igrants involveent in hoeland conflict include counities as diverse as the Irish, the Arenian or the Cabodian diasporas. Such cases are extensively docuented by an iportant literature in political sciences (see for instance Sith and Stares (2007)). It notably ephasizes the role of igrants financial contributions, which are often targeted towards ared groups and political parties in order to subsidize conflict or political activity.1 1 Obviously, igrants also send funds to their origin country as reittances to their failies. Reittances are not neutral with respect to conflict, since they odify the recipients budget constraint and then their opportunity cost to get involved in civil war or becoe activists. However, the analysis of the specific ipact of reittances on conflict is beyond the scope of this paper. 2

6 In spite of such evidence and rich qualitative research, the econoic literature has reained so far quite silent on the echaniss through which diasporas can shape conflict in the origin country. On the one hand, the vast literature considering the possible ipact of eigration on sending countries outcoes has overlooked the onset and intensity of civil conflict as relevant variables of interest. Even the few papers interested in the consequences of igration for intergroup copetition in the sending country (Mariani, 2007; Docquier and Rapoport, 2003) have not odeled conflict and the choice between war and peace. Soe recent (and ostly epirical) studies, however, have shown that igrants can soehow shape institutions and politics in the sending country. For instance, Spilibergo (2009) provides evidence that foreign students have a positive ipact on deocracy at hoe countries, while Docquier et al. (2016) ephasize a positive effect of eigration on institutional developent in the sending country. Consistent with these crosscountry results, a few icro-oriented papers also docuent the ipact of igration on political participation and opinions in the origin counities. In particular, Batista and Vicente (2011) find that Cape-Verdean non-igrants living in ore igration-intensive localities exhibit higher deand for political accountability, while Chauvet and Mercier (2014) suggest that Malian return igrants transfer electoral nors to their origin counities, notably in ters of participation. Finally, Pfutze (2012) and Barsbai et al. (2016) respectively find that igration increases the probability that an opposition party wins a unicipal ballot (in Mexico), and lowers the support for the incubent Counist party (in Moldova). On the other hand, the otherwise rich literature on conflict tends to neglect the role played by diasporas. As far as epirical studies are concerned, the only exception has long been Collier and Hoeffler (2004), who highlight a positive correlation between the proportion of igrants in the US and the probability of conflict in the hoe country, thus suggesting that diasporas ay be a risk factor in the re-ignition of wars. More recently, Docquier, Ruyssen, and Schiff (2014) find that bilateral igration increases the likelihood of interstate conflict. As far as doestic conflicts are concerned, Preotu (2016) reports that eigration to developed countries can decrease the incidence of civil war in the countries of origin. What is still issing, however, is a proper theoretical fraework to understand through which channels igrants influence the evolution of conflict in the 3

7 origin country. As pointed out by Blattan and Miguel (2010), in spite of the ajor role played by diasporas in rebel finance, an iportant liitation of the existing theoretical work on ared conflict causes [is] its alost exclusive focus on the internal ared groups decision of whether or not to fight. This paper is a first step in this research direction. We present a odel of conflict in which two groups contest a resource which can be consued as a group-specific public good. Open conflict requires labor, and involves the destruction of soe of the resources of the econoy. Within each group, agents, who are ex-ante identical, collectively decide on the optial allocation of labor between direct participation to the conflict (as soldiers, or activists) and productive activities. In this setting, we introduce a diaspora eanating fro one of the two groups. In case of conflict, igrants can decide to provide funding to their group of origin (i.e. subsidize its war effort), thus affecting the intensity and outcoe of conflict. Given the characteristics of the iplied conflict equilibriu, the two groups of residents ay choose to negotiate a pacific settleent if there exists a sharing rule that akes both of the better off than war. In a first, static specification of our odel, we consider the diaspora as an exogenous stock of econoic igrants, whose decision to leave the source econoy is essentially independent on the latent risk of conflict in their origin country. In practice, however, igration is also driven by conflict, which aplifies the incentive to eigrate and triggers flows of refugees. It is then difficult to distinguish purely econoic fro conflict-generated eigration. In order to account for this diension, the second part of the paper describes the dynaics of the odel when the diaspora evolves over tie as a result of successive igration waves. Migration outflows endogenously depend on source-destination utility differentials, which are in turn affected by the outbreak (or resolution) of conflict. We then characterize the joint evolution of igration and conflict. As far as the results are concerned, we first ephasize the role that igration can play in the escalation of violence. We show that there exists a threshold diaspora size above which igrants provide a positive contribution to the war effort of their group of origin. This contribution increases with the size of the diaspora, leading in turn to an increase in the share of fighters in the origin group. We also find that the peace war tradeoff is affected by the diaspora, which can play either 4

8 a peace-building or a peace-wrecking role. In particular, it is ore likely to act as a peace-building force in cases when negotiation is ore costly, productivity is lower (which reduces the opportunity cost of violence), and/or the aount of contested resources is lower. Furtherore, we show how the critical size that the diaspora needs to attain in order to trigger a switch fro war to peace (and vice versa) depends on the size of the two resident groups. Such critical size notably turns out to be larger when the rival group is ore nuerous. Last, our dynaic analysis allows for a feedback effect of war (or peace) on igration. In the case of a potentially peace-wrecking diaspora, the two-way relation between igration and conflict ay generate ultiple steady states, naely a peaceful equilibriu with a saller diaspora and a conflict equilibriu with larger eigration. More generally, we highlight the role of the openness of frontiers in defining the trajectory of the econoy towards peace or war in the long-run. A ore perissive igration policy, for instance, ay allow a diaspora to fulfil its peace-building potential. The rest of the paper is organized as follows. The benchark odel is outlined and solved in Section 2. The dynaics of our odel, along with a few policy iplications, are described in Section 3. Section 4 discusses a few case studies and relates the to our theoretical results. Finally, Section 5 concludes and proposes soe extensions. 2 The static odel We start by presenting a siple odel of conflict involving two groups. We are agnostic with respect to the source of difference between the two groups, which can be ethnic, religious, politic, etc. Migration is assued to concern only one of the two groups and, as far as the static version of the odel is concerned, to be exogenous. 2.1 The econoic environent We consider a population divided into two groups, indexed by E (the elite) and O (the oppressed group), respectively. Group E is ade up of E individuals, all residing in the hoeland and characterized by productivity ye. Group O is originally ade up of O individuals. However, ebers of this group igrate and live abroad. The O resident ebers of group O 5

9 have productivity yo, while the igrants (who will be henceforth referred to as group M ) are characterized by a productivity (1 + µ)yo, with µ > 0. We further assue ye = κyo = κy, with κ > 0, so that y can be interpreted as the overall level of developent of the econoy while κ is a easure of between-group inequality. In order to sidestep external effects and free-riding probles, we assue that each group s decisions are taken by a leader who ais at axiizing the group s average utility. As in Esteban and Ray (2008, 2011), individual utility is derived fro private consuption c, and fro a grouplevel public good Q which depends on the appropriation of a given resource (or public budget) R. The average utility functions axiized by the three groups leaders are the following: ue = ce + χqe, (1) uo = co + χqo, (2) um = cm + ηχqo, (3) and where χ > 0 denotes the preference for the public good, which is further weighted by η > 0 in the case of igrants. Hereby we are suggesting that igrants are interested in the access of their group of origin to the public good, but ay attach to it a different weight in their utility function.2 The quantity Qi (i = E, O) of public good that groups O and E can have access to depends on the appropriation of a contested resource R. Exaples ay range fro the obtention of a (share of the) public budget highlighted by Esteban and Ray (2008, 2011), to sheer territorial expansion. The contested resource ay be subject to violent conflict or shared through a process of negotiation. In case of conflict, group E (respectively, O) obtains a share s (respectively, 1 s) of R, where s is given by the following contest function: s(ae, AO ) = γae. γae + (1 γ)ao 2 (4) Assuing that igrants are interested in the public good contested in the hoeland is consistent with exaples of diasporas being highly involved in the political situation in their hoe country, which ay also be decisive for their opportunity to igrate back hoe. 6

10 In the above expression, Ai (i = E, O) denotes the nuber of soldiers (or activists) that group i allocates to conflict, and γ represents the relative (dis)advantage of group E in conflict.3 It reflects the idea that, prior to conflict, the two groups ay have a different access to conflict-related inforation or technology, for instance.4 Alternatively, s(ae, AO ) can be interpreted as the probability that group E will capture the whole aount of resource R. Open conflict is costly: it entrains the destruction of a share δ of the total resources located or produced in the econoy, i.e. residents private production (yo and ye ) and R. Migrants differ fro residents since they are not concerned by the destructive effect of war on private production. Note also that conflict has an opportunity cost: individuals who are eployed as soldiers are reoved fro productive activities so that, for instance, group E gives up a total quantity of private consuption equal to AE ce. In this context, igrants can decide to get actively involved in the conflict by subsidizing soldiers fro their group (O) in the origin country. The value of the subsidy and the very fact that igration akes group O shrink are the two channels through which the diaspora interplays with conflict and the peace war choice in our odel. We rule out, however, that igrants can be recruited as soldiers, as well as the possible productivity and price effects of igration on the hoe econoy. In case the two groups choose to split resources without resorting to ared conflict, they engage in a process of negotiation and ust ultiately agree on the sharing rule s. Negotiation iposes a cost Z onto each group. Such a cost is justified by negotiation being tie- or resource-consuing, and also accounts for the possibility that past conflicts generate hatred and distrust between the involved actors, thus aking the, to soe extent, prefer war over pacific settleent. A positive Z ay also be related to the lack of a perfect coitent technology associated with the peaceful settleent of the conflict. 3 Contest functions of this type, whose theoretical foundations are outlined in Jia, Skaperdas, and Vaidya (2013) and Garfinkel and Skaperdas (2007), are widely used in the literature on conflict. 4 Note that we do not assue γ larger or saller than 1/2 so there is no prior on which group should have a relative advantage in the conflict. 7

11 The odel with conflict Optial choices Suppose now that R is contested through violent conflict. The leaders of the two resident groups ust deterine the share of the labor force that they allocate to conflict. More precisely, the leaders of group E and O choose θe and θo, such that AE = θe E and AO = θo ( O ), respectively. On the other hand, the leader of group M decides a, i.e. how uch the diaspora will contribute for each soldier deployed by group O. This transfer ay thus be interpreted as a subsidy to group O s involveent in conflict. The total aount of war-targeted financial transfers, aao, will then be shared equally aong the resident ebers of group O, thus reducing the opportunity cost of war for group O. In our fraework, production in the origin country is entirely transfored into private consuption. Accordingly, in case of war ue and uo write as ue,w = (1 δ)((1 θe )κy + χs(ae, AO )R), (5) uo,w = (1 δ)((1 θo )y + aθo + χ(1 s(ae, AO ))R), (6) and respectively. Given that the utility function is linear in its two arguents, the convexity of the proble derives fro the shape of the contest function. For a given a, the first order conditions ue,w / θe = 0 and uo,w / θo = 0 yield the following reaction functions: p θe (θo ) = γ E (1 γ)( O )κyθo χr κy(1 γ)( O )θo, κyγ E (7) and p θo (θe ) = γ E (1 γ)( O )(y a)θe χr (y a)γ E θe. (y a)(1 γ)( O ) (8) Figure 1 depicts the two reaction functions, as well as their intersection, which corresponds to 8

12 Figure 1: Reaction functions of groups E and O. the following equilibriu values: θe (a) = χr(1 γ)( O )γ E (y a), ((y a)γ E + κy(1 γ)( O ))2 (9) θo (a) = χr(1 γ)( O )γ E κy. ((y a)γ E + κy(1 γ)( O ))2 (10) and (a) and θ (a) we can obtain A (a) and A (a), i.e. the equilibriu sizes of the two aries, Fro θe O E O depending on a. Notice that the best-response functions are hup-shaped, eaning that when a group is faced with increasing opposition it initially responds by escalating conflict, but is eventually liited by its resource constraint and decreases its involveent in conflict if the other group s activis grows further. In case of coplete syetry ex ante and in the absence of active intervention by the diaspora (γ = 1/2, κ = 1, E = O, a = 0), the conflict equilibriu is also syetric and lies on the 45 line. 9

13 As far as the diaspora is concerned, um can be written, in case of conflict, as um,w = (1 + µ)y a (a)( ) θo O + (1 δ)ηχ(1 s(a E (a), A O (a)))r. (11) (a), θ (a), A (a) and A (a), the leader of group M axiizes u Knowing θe M,w with respect O E O to a, the aount transferred to each soldier of group O. Fro um,w / a = 0, we can retrieve a as a function of. It is possible to show that there exist 1 and 2 such that: 0 y(γ E + (1 γ)κ( O ))((1 δ)η ( O )) a = γ E ((1 δ)η + ( po )) y(γ E + (1 γ)κ( O )) γ E (1 γ)( O )κyχr γ E if 1 if 1 < < 2. (12) if 2 < O If 0 < 1, the optiization progra of group M would lead to negative values for a. Since the diaspora can only provide a non-negative contribution, we consider 0 1 to be associated with the corner solution a = 0.5 When reaches 1, the diaspora becoes big enough for a strictly positive involveent in the conflict to be optial. The size of this contribution increases with the nuber of igrants. Finally, when equals 2, the contribution of the diaspora is large enough to ake θo reach one. In other words, group O s involveent in conflict is so heavily subsidized by eigrants that all the resident ebers of group O are eployed as soldiers (or activists), and payed out of the diaspora s contribution. Overall, the function a () behaves as represented in Figure Equilibriu We now turn to the analysis of the conflict equilibriu. By using the expression for a in Equa, θ and a as tion (12) to replace a in Equations (9) and (10), we obtain the equilibriu values θe O functions of the paraeters only. 5 If we were to consider negative values for a, they could be interpreted as the diaspora withdrawing capital fro the hoe country. 10

14 a 1 2 Figure 2: Equilibriu response of group M. In order to have shorter expressions, we ipose a few restrictions on the paraeters. In particular, we set γ = 1/2 (syetry in conflict between groups E and O), κ = 1 (groups O and E have the sae productivity), and η = 1 (igrants value the public good as uch as residents). We also assue that the paraeters satisfy the following: Assuption 1 1 δ E 1 δ < <. 2 O δ This assuption, which is by no eans necessary for the odel to be solved but allows us to derive sipler results, requires the two groups not to be too different in size, so that none of the is big enough to push the other group out of conflict if its size arginally increases. Note also that the odel can be fully solved in the general case of 0 < γ < 1, κ > 0 and η > 0 and would yield qualitatively siilar results. Once the above assuption and paraeter restrictions are taken into account, we can rewrite 11

15 Equation (12) as 0 y( E + ( O ))((2 δ) O ) a () = E ( O δ) p y( E + ( O )) E ( O )yχr E if 1 if 1 < < 2 (13) if 2 < O where 1 = O, 2 δ (14) (a, ) = 1.6 while 2 solves θo () and Although a depends on several paraeters, we use the notation a () (as well as θe ()) in order to highlight the ipact of the diaspora on the conflict equilibriu. θe (a) and θ (a), we further obtain: By replacing a () in θe O ( O ) E χr y( E + ( O ))2 ( O δ)(2 E + O (2 δ)) θe () = χr 4y( E + ( O ))2 p E ( O )yχr y E ( O ) y E and ( O ) E χr y( E + ( O ))2 ( O + δ)2 E θo () = χr 4y( O )( E + ( O ))2 1 if 1 if 1 < < 2, (15) if 2 < O if 0 < 1 if 1 < < 2. (16) if 2 < O For ease of exposition, we call A, B and C the three regions defined by 1, 1 < < 2 and 2, respectively. The relationship between the diaspora s contribution to conflict a and its size, for all adissible values of, can be described as follows. Proposition 1 The value of the diaspora s contribution at equilibriu, a (), is zero over region A. It is an increasing function of over region B and a U-shaped function of over region C. 6 The coplete expression for 2, which is rather coplicated, is given in the Appendix. 12

16 Proof. Follows fro the inspection of the partial derivatives of the expression of a () given by Equation (13). Looking at 1, we first can see that the inial size such that the diaspora starts intervening actively in the conflict increases with O and δ. If igrants coe fro a relatively sall origin group, the size of the diaspora such that they start subsidizing conflict in the hoe country is also sall. On the other hand, all other things being equal, conflicts that are potentially ore destructive are financed by larger diasporas. When the size of the diaspora is saller than 1, there is no contribution fro igrants. When 1 < < 2, the diaspora intervenes actively in the conflict, and its contribution increases with its size. Finally, when exceeds 2, the contribution of the diaspora ensures that θo reains constant and equal to 1.7 The following Proposition describes how the shares of workforce that, in equilibriu, the two groups allocate to conflict, depend on the size of the diaspora. Proposition 2 The relationship between the size of the diaspora and the shares of soldiers in each group depends on the shape of the diaspora s contribution. In particular, and θ are -shaped functions of ; (i) over region A, θo E is a growing function of while θ is -shaped; (ii) over region B, θo E is constant and θ is a -shaped function of. (iii) over region C, θo E () and θ () as in EquaProof. Follows fro the inspection of the partial derivatives of θe O tions (15) and (16) with respect to. Over region A, i.e. as long as the diaspora does not subsidize conflict, groups O and E behave syetrically and allocate the sae share of their labor force to conflict. Each group s θ increases with the group s size, as long as the latter is saller than the other group s size. However, if an 7 In this setting, an additional increase of the size of the diaspora has a U-shaped effect on the diaspora s involveent. First, when the diaspora becoes bigger, the contribution is dissolved between ore igrants which allows the subsidy a () to diinish. At the sae tie, the shrink of the nuber of residents akes it ore and ore difficult to prevail in the conflict, and thus at one point the copensation fro the diaspora which ensures that all the resident ebers reain soldiers needs to be bigger. 13

17 already doinant group grows even bigger, both groups allocate a saller share of their huan resources to fighting. Within this region, although the diaspora does not contribute to the conflict, it influences it by its size. Naely, the share of soldiers in each group is a -shaped function of : when the nuber of igrants gets larger, group O becoes autoatically weaker than group E in case of conflict, and ust copensate by increasing its ilitary engageent. Group E will. Eventually, however, if the diaspora grows further the pool of react accordingly by increasing θe available soldiers becoes too sall for group O to be able to prevail: group O will then withdraw huan resources fro conflict, causing group E to do the sae. Within region B, the diaspora s financial support to group O is internalized by both groups in their decision over the optial share of soldiers. Different fro region A (corner solution with passive diaspora), the two groups do not have syetric behaviours. In particular, the share of soldiers in group O increases with the size of the diaspora. On the other hand, the ipact of the () is of abiguous sign: it is positive when > (1 δ) and negative diaspora s support on θe E when the inequality is reversed. When the diaspora is relatively sall (with respect to group E), its financial involveent in conflict does not represent too big a threat for group E, which will siply to atch a larger a and the iplied increase in θ. When the nuber of igrants is adjust its θe O relatively large, the diaspora s contribution to group O ay act as a deterrent for group E, which prefers to reduce the nuber of its soldiers. Last, when exceeds 2 (region C), the oney sent back hoe by the diaspora is such that = 1. This region corresponds to another corner solution, in which the diaspora is active but, θo is constant. eventually, only affects the equilibriu via size effects since θo Although interesting, the corner regions A and C are less inforative regarding the interactions between diaspora and conflict. Within region A, the diaspora does not contribute financially to the conflict and only plays a role through a echanical size effect. Region C sees group O invest all its huan resources in conflict, regardless of the size of the diaspora. In what follows, we thus assue that the following holds. Assuption 2 The size of the diaspora is such that 1 < < 2. This eans that we focus on region B, where we observe siultaneously the size effect and the 14

18 contribution effect of the diaspora. 2.3 War vs peace So far we have analyzed a situation of conflict, in which the two groups resort to war in order to conquer their shares of the contestable resource R. However, this is not the only option available to the leaders of the two groups, who can alternatively sit at a table and peacefully negotiate how to share R. Negotiation iplies that both parts agree on a sharing rule s, such that group E obtains fraction s of R, while fraction 1 s goes to group O. Given the conflict-equilibriu value θi () (i = E, O), the leader of group i ay prefer to engage in a negotiation, which iplies a fixed cost, rather than initiating conflict, which destroys resources and requires labor force. For this to be the case, there ust exist a non-epty set of values of s such that the utility of group i in case of war, ui,w, is lower than its utility if a peaceful settleent is reached, ui,p. For negotiation to actually take place, there ust exist values of s such that both groups are better off without war. and θ into Equations (5) and (6), the utilities of the two groups in case of Replacing a, θe O conflict can be rewritten as: (2 E + 0 (2 δ))2 χr, ue,w () = (1 δ) y + 4( E + ( O ))2 (17) ( O δ))2 χr uo,w () = (1 δ) y +. 4( E + ( O ))2 (18) and Peaceful settleent avoids the destruction generated by conflict, and keeps all the labor force in the productive sector (θo and θe are set to zero). However, it iplies that both groups pay a fixed cost Z. In case of peace, groups E and O thus obtain ue,p = y + sχr Z 15 (19)

19 and uo,p = y + (1 s)χr Z, (20) which, different fro ue,w and uo,w do not depend on. Solving ui,p = ui,w (for i = E, O), we can deterine the threshold functions s E () and s O (). These functions give the values of s which, for each possible, ake the two groups indifferent between open conflict and peaceful settleent. In particular, we obtain Z δy + (1 δ) s E () = χr (2 E + 0 (2 δ))2 4( E + ( O ))2, (21) and s O () = 1 Z δy + (1 δ) χr ( O δ)2 4( E + ( O ))2. (22) The two groups agree on a peaceful negotiation only if there exists a sharing rule s which akes both of the better off than war. It then follows that Proposition 3 For any given, a pacific settleent is viable only if s E () s O (). Note that the negotiated sharing rule s is a priori undeterined, as there exist ultiple values of s such that the two groups prefer peace to war. To resolve indeterinacy, we will assue later on (see Section 2.4) that the sharing rule negotiated by the two groups in case of peace is the outcoe of a Nash-bargaining process. Under Assuption 2, both functions s E () and s O () are decreasing with. By subsidizing group O in case of conflict, a larger diaspora induces a higher propensity for group O to engage in conflict, while strengthening the preference of group E for a peaceful settleent. Otherwise said, a larger strengthens the bargaining power of group O by increasing its conflict outcoe uo,w. To assess whether the groups actually choose to negotiate peace, depending on, we need to establish under which conditions s E () is saller than s O (). In case s E () > s O (), no peaceful sharing rule would ake both groups better off than war, which will then be the equilibriu. Switches between war and peace occur for values of such that s E () = s O (). 16

20 Proposition 4 Let ˆ and be the two values of that solve s E () = s O (), with ˆ <. Under Assuption 2 (i.e., the diaspora s contribution is positive but not large enough to push group O to eploy all its ebers as soldiers), there exist: 1 Z0 = δy + (1 + δ)χr 4 and Z1 = δy + χr δ (2 δ)(1 δ)2 E O + 2 ((2 δ) E + (1 δ) O )2, with Z0 > Z1, such that: (i) If Z > Z0, the diaspora cannot prevent war in the hoe country, i.e. s E () > s O (). (ii) If Z1 < Z < Z0, the two groups are at war for = 1 and the diaspora is potentially peacebuilding. A switch fro war to peace occurs within region B if ˆ < 2. A second switch fro peace to war ay also exist if < 2. In such a case, an initially peace-building diaspora ay turn peace-wrecking as it becoes very large. (iii) If Z < Z1, the two groups are at peace for = 1 and the diaspora is potentially peacewrecking. A switch fro peace to war occurs within region B if < 2. Proof. Solving s E () = s O () yields the two possible solutions ˆ and, whose expressions are given in Appendix B. These solutions are real nubers only if Z < Z0. If Z > Z0, the two curves s E () and s O () do not cross, and s E (0) > s O (0). This proves (i). If Z < Z0, the two curves s E () and s O () intersect twice over ], [. Whether the two intersections ˆ and fall within ]1, 2 [ deterines possible switches fro war to peace and peace to war. We also know that s E () and s O () are both decreasing functions of over ]1, 2 [, but that there exists a value of larger than 2 above which s E () starts increasing with. This iplies that ˆ corresponds to a switch fro war to peace, and that corresponds to a switch fro peace to war. If Z1 < Z < Z0, ˆ > 1. This iplies that s E (1 ) > s O (1 ) and the two groups are initially (i.e., at = 1 ) at war. As soon as reaches, ˆ s E () becoes saller than s O () and the two groups prefer to peacefully share the contested resource. Peaceful negotiation effectively happens 17

21 if ˆ falls within the boundaries of region B, i.e. if ˆ < 2, and the diaspora then has a peacebuilding effect. Last, if also falls within the boundaries of region B ( < 2 ), the diaspora can trigger a second switch fro peace to war for large values of. This proves (ii). Finally, if instead Z < Z1, then ˆ < 1 and the two groups are at peace when = 1. However, if falls within region B, a growing diaspora is able to trigger a switch fro peace to war, which proves (iii). Figures 3, 4 and 5 describe the possible cases of non-neutral diaspora (i.e., when Z < Z0 ). The red (respectively, blue) line represents the threshold value of the sharing rule above (below) which group O (E) does not accept peaceful settleent. These lines are dashed in case of war, when the sharing rule derived fro the conflict equilibriu is represented by the purple line. They are solid when the equilibriu is peaceful (i.e., when s E () < s O ()), in which case the light green area represents the set of feasible sharing rules. Within this area, the solid green line depicts, for every possible, the negotiated sharing rule derived fro the Nash-bargaining process. Notice that in all cases, when 1 (region A), s E () and s O () are both increasing with. The diaspora does not contribute and only has a size effect on the equilibriu, aking group E (O) ore (less) willing to engage in conflict. Figure 3 describes the case of a peace-building diaspora (Z1 < Z < Z0 ). The two groups are at war when = 1, and when reaches, ˆ the diaspora is sufficiently large to trigger a switch to peace. Eventually, if is within region B, peace can be broken again when igration reaches this second threshold value. The diaspora then first plays as a peace-building actor, but turns peacewrecking if its size becoes very large. Figure 4 illustrates this specific case. Last, Figure 5 describes the case of a peace-wrecking diaspora. The two groups are at peace when = 1, which necessarily iplies that ˆ < 1 <. Peace is observed for all the values of which are saller than. When reaches, the diaspora triggers a switch fro peace to conflict. As stated by Proposition 4, the diaspora is neutral when the cost of peace is too high (Z > Z0 ), it has a peace-building potential when the cost of peace is relatively, but not prohibitively, high (Z1 < Z < Z0 ), and a peace-wrecking potential when the cost of peace is low (Z < Z1 ). 18

22 s s O () s () E 1 2 Figure 3: Peace-building diaspora. s s E () s () O 1 2 Figure 4: Peace-building, then peace-wrecking diaspora. s s O () s () E 1 2 Figure 5: Peace-wrecking diaspora. 19

23 In particular, a situation in which the diaspora, regardless of its size, has no chance whatsoever to pull the origin country out of war is ore likely when Z0 is sall. This corresponds to a relatively low cost of the war (low δy and/or low δχr). On the contrary, when the cost of the war is high (Z0 large), the diaspora is ore likely to be able to play a role. If the diaspora is non-neutral (Z < Z0 ), it is ore likely to play a peace-building role if Z1 is sall. Looking at the effects of the paraeters on Z1, the peace-building scenario becoes ore likely if y, χ and R decrease. In fact, if a switching point exists, it will be fro war to peace if s E (1 ) > s O (1 ), i.e. the econoy is at war when = 1. This is ore likely when the resources subject to potential destruction (y, R) as well as the iportance of the contested resource in the utility function (χ) are liited. Finally, it ay be interesting to look at the effect of the paraeters on ˆ and, i.e. the threshold size that the diaspora ust reach in order to bring about a switch fro war to peace and vice versa. The coparative statics on ˆ and are not obvious because in general, they depend on specific conditions on the paraeters. We can however prove the following results concerning the effects of the two groups size. Proposition 5 The threshold values ˆ and increase with E. They also increase with O if E < (1 δ). Proof. The results can be established by eans of the Iplicit Function Theore, under Assuption 1. The first result tells us that, expectedly, it takes a larger diaspora to ake the difference when the size of group E increases. Second, the threshold size of the diaspora which triggers a switch increases with the size of group O only when group E is relatively sall. This is due to the fact that the arginal ipact of the diaspora on the origin group s outcoe decreases with the size of group E.8 8 Recall that E < (1 δ) also ensures that θe increases with a (see point (ii) of Proposition 2). 20

24 2.4 Nash bargaining As entioned above, if groups E and O decide to avoid war and resort to peaceful negotiation in order to split R, there can exist a set of values of s they ay agree upon. To resolve such indeterinacy, we assue that the value of s which eerges is the outcoe of Nash bargaining, i.e. s() = arg ax(uo,p uo,w ())(ue,p ue,w ()). (23) s In other words, the two groups axiize the product of their respective surpluses fro peace (defined using war utilities as threat points ).9 In particular, after replacing the conflict-equilibriu, θ and a in the utility functions, we obtain values θe O (1 δ) E δ + 2 E + O (2 δ) + (2 (2 δ)δ) E O s() = 2( E + O ) δ (1 δ)y( O ) 1 p 2 y( O ) E χr if 0 < 1 if 1 < < 2. (24) if 2 < O It can be shown that the negotiated s is always increasing in over regions A and C, while it decreases with over region B under Assuption 1. This is due to the effect of on the war outcoes of the two groups. As long as the diaspora does not subsidize conflict (region A), a larger iposes a negative size effect on the share of resources that group O can obtain in case of war, thus weakening its bargaining power and leading to a higher s. A siilar situation occurs in region = 1: as group O shrinks, due to increased igration, its war outcoe worsens and C, where θo the share 1 s of resources it can obtain through negotiation decreases. Instead, within region B, a larger diaspora translates into a potentially higher war outcoe for group O, which can thus negotiate peace on better ters and ipose a lower s on group E. 9 Note that the Nash-bargaining process we use is syetric, as the two groups surpluses have the sae weight in the objective function. Asyetry, however, could arise indirectly through the paraeter γ, which affects the war outcoes of groups E and O. Here, the results are displayed under Assuption 1, and no such asyetry is possible. 21

25 3 The dynaic odel: endogenous diaspora The static odel developed in Section 2 considers igration as exogenous. This hypothesis is fairly consistent with diasporas that ostly gather econoic igrants. One cannot ignore, however, that igration intensity is also affected by conflict in the hoe country, which ay ipact the incentive to igrate and generate for instance sizable flows of refugees. 3.1 The set up To account for this possibility, we develop a dynaic version of our benchark odel in which the size of the diaspora endogenously evolves over tie. In each period t, a new flow of igrants fro group O adds up to the existing stock of igrants abroad t. This igration outflow is supposed to depend positively on the difference between utility abroad um,t (t ) and at hoe uo,t (t ).10 The size of the diaspora evolves over tie according to t+1 = (1 ζ)t + b(um,t (t ) uo,t (t )) = f (t ), (25) where 0 ζ < 1 and b > 0. The paraeter ζ accounts for the erosion of the diaspora over tie. In the absence of explicit deographic echaniss, such erosion ay be due for instance to the process of assiilation of soe igrants, who becoe less and less involved in the collective decision of the diaspora. The paraeter b reflects the degree of openness of frontiers: the higher b, the larger the flow of igrants, for a given net utility gain fro igration. For the sake of siplicity, b is considered as constant. It ay, however, evolve over tie and depend on the very existence of a violent conflict which, for instance, ay push destination countries to adopt ore welcoing policies and ake entry easier for refugees.11 Consistent with the static odel, igration affects only the size of group O, which at every t is 10 Although we do not odel explicitly individual igration choices, our reduced-for interpretation is copatible with a situation in which resident ebers of group O decide whether to igrate or not by coparing the utility gain attached to igration, um,t (t ) uo,t (t ), to their individual igration cost. For a given distribution of igration costs, a larger utility gain will translate into a larger outflow of igrants. 11 In a siilar fashion, variables such as y and R, which are related to the level of developent of the country, ay depend on the evolution of igration and the peace conflict tradeoff, thus introducing an endogenous growth echanis in the odel. This goes however beyond the scope of the current study and is then left for further research. 22

26 equal to O t. The transition function resulting fro Equation (25) is piecewise, depending on whether s is the outcoe of conflict (t+1 = fw (t )) or negotiation (t+1 = fp (t )), and whether we have interior or corner solutions. In particular, within region B (1 < < 2 ), we obtain t+1 (1 ζ)t + byµ = ( O δ)2 ( E + O (2 δ))χr (1 ζ)t + b y(δ + µ) + 4( E + O )2 if s E () s O (). if s E () > s O () (26) As in the static analysis, we focus on interior solutions (Assuption 2 holds) and we consider two different cases. With a peace-building diaspora (Figure 3), the transition function displays a discrete downward shift for = ˆ since the switch to peace lowers the incentive to igrate. This is depicted in the first panel of Figures 7 and 6, where t+1 = fw (t ) for < ˆ while t+1 = fp (t ) for >. ˆ On the contrary, with a peace-wrecking diaspora (Figure 5), the switch to war at iplies an upward shift in the transition function, as displayed in Figures 8, 9 and 10, where t+1 = fp (t ) for < while t+1 = fw (t ) for >. 12 We are interested in deterining the stationary level of igration, i.e. SS which solves t+1 = t, and establishing whether the syste reaches its steady state in a peace or conflict situation. Since the analytical treatent of the odel proves to be particularly cubersoe due to the shape of the transition function in case of war, we liit ourselves to the analytical characterization of stationary equilibria arising in peace. We then turn to nuerical exaples in order to provide a ore coplete illustration of the dynaic behaviour of the odel. As far as peaceful equilibria are concerned, we can clai the following. Proposition 6 A stable stationary equilibriu with peace exists if and only if (i) (ii) ζ ˆ ζ2 <b<, when the diaspora is potentially peace-building (Z1 < Z < Z0 ), yµ yµ ζ1 ζ <b<, when the diaspora is potentially peace-wrecking (Z < Z1 ), yµ yµ 12 For the sake of consistency with the static analysis, all the figures describing the dynaic behaviour of our odel include a portion of region A, although in the text we restrict ourselves to the analysis of interior solutions (region B). 23

27 where, ˆ are as in Proposition 4. Moreover, SS = byµ, ζ and sss = byµ(2 (2 δ)δ) ζ((2 δ) E + O ). 2byµ 2ζ( E + O ) Proof. A peace equilibriu exists if and only if the peace branch of the transition function, i.e. fp (t ), crosses the 45 line. When the diaspora is potentially peace-building, this is the case if fp () ˆ > ˆ and fp (2 ) < 2. Such inequalities lead to the condition in (i). When instead the diaspora has a peace-wrecking potential, we need fp (1 ) > 1 and fp () <, which give the condition in (ii). If a peaceful steady state exists, it is stable since the slope of fp (t ) is saller than 1, which is ensured by ζ < 1. The values of SS and sss are found by solving fp () = and replacing SS in Equation (24) when 1 < < 2. Not surprisingly, the stationary size of the diaspora is an increasing function of b (openness) and yµ (igration preiu) while it decreases with ζ (assiilation paraeter). As far as the sharing rule is concerned, it reaches a steady-state level ore favorable to group O when steadystate igration is larger. This is consistent with the static analysis that shows how, within region B, a larger confers a higher bargaining power to group O by increasing its war outcoe. 3.2 Siulations Our nuerical siulations are based on a paraeterization which ensures that Assuption 1 is verified. Consistent with Section 2, we start by considering the case of a potentially peace-building diaspora and then describe the peace-wrecking case, where ultiple equilibria ay also eerge. In all our exaples, we set O = 0.4, y = 2, κ = 1, R = 2, γ = 0.5, δ = 0.1, χ = 0.6, η = 1, µ=1 and ζ=0.3. As far as the two reaining paraeters are concerned, we generate the peace-building and peace-wrecking cases by choosing different values of Z consistent with the prescriptions of Proposition 4. Within each of these two cases, we play with b so as to analyse the iplications of 24