Trading with the Enemy: An Economic Experiment with Residents of Mosul, Iraq

• In Event: Political Psychology in the Wake of Violence

Abstract

After armed conflict, the legacies of intergroup violence may impact preferences and hinder economic interactions across group lines. This poses an important problem for countries which have experienced destructive and protracted intergroup conflict. However, how, and under what circumstances, individuals’ preferences are affected is an area of great scientific interest, which is only beginning to be more thoroughly explored. I carry out an experiment with 1000 inhabitants of Mosul in Iraq, who resided there during the battle of Mosul in 2016-2017. Using a measure of endowment effects (i.e. the difference between the asking and buying price of the same good) in a hypothetical trade, I manipulate the characteristics of the counterparty. The results show that the endowment effect is impacted by the identity of the counterparty, with higher endowment effects for interactions with outgroup members. However, this effect is shown to be clearly driven by losing resources, in particular having one’s house destroyed. Furthermore, access to resources seems to act as a buffer. This suggests that war exposure, and in particular loss of resources, may introduce impediments to economic activities in ways previously overlooked.

Author

• Eric Skoog, PRIO