The Impact of the Kimberley Process Certification Scheme on Country-Level Competition in the International Rough Diamond Market

Abstract

The Kimberley Process, a policy to curb conflict diamonds from reaching international markets, has now been implemented for more than ten years. Amidst discussions to change or make additions to the existing conflict diamond policy, as well as rising awareness about other conflict minerals, the creation of future conflict resource related policy appears inevitable. To aid the development of future policy in this industry, this paper studies if the Kimberley Process has had an impact on country level rough diamond competition. Using data compiled from a number of academic and industry sources, we employ a discrete choice oligopoly model to estimate demand and evaluate competition in the rough diamond market while allowing for unobserved product and country characteristics and controlling for endogeneity of price. In this way, we investigate the impacts of the Kimberley Process on competition and estimate own- and cross-price elasticities for top producers. The results suggest that the Kimberley Process has reduced the competitive advantage of autocratic governments and has increased competition among top producing countries.