The Price of Instability: The Economic and Human Cost of Climate Shocks

Climate shocks carry severe economic and human costs that can destabilize societies. Floods, droughts, and other extreme events disrupt agricultural production, drive up food prices, and erode household purchasing power. These economic pressures can also intensify violent conflict, compounding the human toll. In this study, I use a three-stage design to uncover how climate shocks link economic disruption to conflict. First, I identify floods as the most robust climate shock instrument. Second, I estimate their direct effect on food price volatility using a staggered treatment difference-in-differences framework. Third, I assess the impact of floods on battle deaths, both directly and when accounting for food price volatility. The findings show that floods increase battle deaths only when they also generate food price volatility, highlighting a mechanism through which climate shocks magnify human suffering. This underscores the need for targeted post-disaster interventions that stabilize markets and for investments in adaptive infrastructure to reduce both economic losses and the risk of violence.