Rationality as a Barrier to Peace: Micro-evidence from Kosovo


Despite a significant expansion of the literature on conflicts and fragility of states, only a few systematic attempts have been made to link the theoretical literature on social conflicts to the available micro-level information about the people who are involved in these conflicts. We address this lacuna in the literature using a household-level data set from Kosovo. Our analysis suggests that it is individually rational for competing ethnic communities, Kosovar Albanians and Kosovar Serbs, to resist a quick agreement on a social contract to share the region's resources.

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Figure 2


  1. 1.

    Note that while the political conflict involves the state of Serbia much more than the Kosovar Serbs, it does not in itself prevent the Kosovar Serbs, who are directly affected by the conflict, from entering into negotiations with their Albanian counterparts to resolve the crisis. There is precedent in the form of negotiations between the primarily Muslim Kashmiris in the Indian part of Kashmir, whose cause is championed by Pakistan, which does not acknowledge Kashmir as a part of India, and the Government of India. Indeed, even the secessionist All Party Hurriyat Conference, which claims to represent the will of most of the Kashmiri people, has been involved in discussions and negotiations with successive Indian governments and has also condemned incidents of what the Government of India claims to be Pakistan-backed terrorist attacks, thereby distancing themselves from a central pillar of Pakistan's foreign policy.

  2. 2.

    Note that unilateral declaration of independence, followed by continued international military presence, does not constitute a political solution. By definition, as in Northern Ireland, a political solution involves bargaining between the warring parties, leading up to some mutually acceptable formula for resource and power sharing.

  3. 3.

    Falk et al. (2003) argue that the perception of fair treatment is an important determinant of conflict. The importance of this perception is likely to be especially high in a context where each of the rival parties involved nurse a sense of grievance about their treatment by the other or competing parties.

  4. 4.

    Acemoglu (2003) demonstrates that societies often choose inefficient institutions because it is not possible for the politicians with different vested interests to credibly commit to a social contract in the event they gain power through the ballot or otherwise, especially in the context of sovereign nations where there is typically no impartial outside observer to enforce all commitments relatively inexpensively.

  5. 5.

    The survey over-samples Serbian households. In a sample containing only these two ethnic groups in Kosovo, Serbs should account for 7.4% and Albanians 92.6% of the observations. In our data, 83% of the households are Albanians and the rest are Serbs. We use weights to account for this difference between the population and the sample.

  6. 6.

    The data were used to construct monthly and daily expenditure per adult equivalence for each household. This estimate was compared with the poverty line of 3.499DM per adult per day given in World Bank (2001).

  7. 7.

    The average exchange rate for the survey period was US$1=2.25DM (Source: Federal Reserve Bank of St. Louis, http://research.stlouisfed.org/fred2/data/EXGEUS.txt).

  8. 8.

    The P α measures of poverty were constructed by Foster et al. (1984), and are given by the expression, P α=(1/n) ∑ yp > y i [(y p y i )/y p ]α where the summation here is over the poor, those households whose per capita expenditure y i , is below the poverty line y P , n is the number of households, and α is a poverty aversion parameter: α=0 gives us the headcount ratio measure (the percentage of the population living below the poverty line); α=1 yields a poverty gap index which represents a ratio of the minimum to maximum costs of poverty elimination; and α=2 is related to the mean of the squared proportional poverty gap which captures an aspect of the severity of poverty; the higher the value of α, the more sensitive the index is to the income of the poorest person.

  9. 9.

    Throughout this paper, per capita expenditure is measured as per adult equivalent household expenditure per month.

  10. 10.

    Note that in Table 2, we use the pooled sample of households and focus on the relative proportion of households from each ethnic group within the (per capita) expenditure deciles. In Figure 2, by contrast, we compare the per capita expenditure of Serb and Albanian households at the 10th through the 90th declines of the respective distributions. Table 2 and Figure 2, therefore, make different points about relative economic status of Serb and Albanian households, and hence cannot be directly compared with each other.

  11. 11.

    In our sample, 60% of the households, 65% of Serbs and 59% of Albanians own some land, thereby making it a reasonable proxy of wealth.

  12. 12.

    The impact of landownership on the measurement of poverty is ambiguous. Buvinic and Gupta (2001) provide evidence suggesting that the degree of poverty acuteness, or consumption deprivation, among female-headed households may be less than expected due to self-consumption of production from the family land holdings. In contrast, Moene (1992) argues that, under certain circumstances, the redistribution of land from large landholders to landless labourers increases poverty.

  13. 13.

    We used interquantile regression models to verify whether indeed there are differences in the relationship between per capita consumption and the explanatory variables at the different percentile levels. The estimates of these models, not reported in the paper, indicate that, for both the Serb and Albanian samples, there are indeed statistically significant differences between the aforementioned relationships at any two successive percentile levels.

  14. 14.

    The conundrum of UNMIK, described below, is exacerbated by what is viewed as the failure of this UN force and its military end, the KFOR, to rein in militants within both the ethnic groups, to the detriment of the civilian population (see O’Neill, 2002).

  15. 15.

    The 1991 census estimated that 82% of the Serbian population were of Albanian origin, 10% were Serbs and the ‘others’, including Montenegrins, made up the balance of 8%. The revised estimates for 2000, based on the Living Standard Measurement Survey data, were 88%, 7% and 5%, respectively (Source: Kosovo and its Population, Statistical Office of Kosovo, http://www.ks-gov.net/ESK/esk/pdf/english/population/Kosovo_population.pdf).

  16. 16.

    We thank an anonymous referee for drawing our attention to the Ahtissari Plan.


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Bhaumik, S., Gang, I. & Yun, M. Rationality as a Barrier to Peace: Micro-evidence from Kosovo. Comp Econ Stud 51, 242–264 (2009). https://doi.org/10.1057/ces.2009.1

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  • conflict
  • individual rationality
  • economic deprivation
  • micro-evidence
  • Balkans
  • Kosovo

JEL Classifications

  • D63
  • D74
  • D78