TY - JOUR
T1 - The economic costs of civil war
T2 - Synthetic counterfactual evidence and the effects of ethnic fractionalization
AU - Costalli, Stefano
AU - Moretti, Luigi
AU - Pischedda, Costantino
N1 - Publisher Copyright:
© 2016, © The Author(s) 2016.
Copyright:
Copyright 2021 Elsevier B.V., All rights reserved.
PY - 2017/1
Y1 - 2017/1
N2 - There is a consensus that civil wars entail enormous economic costs, but there is little systematic analysis of the determinants of their heterogeneous destructiveness. Moreover, reliably estimating these costs has proven challenging, due to the complexity of the relationship between violence and socio-economic conditions. In this article, we study the effect of ethnic fractionalization of war-torn countries on the economic consequences of civil war. Building on an emerging literature on the relationships between ethnicity, trust, economic outcomes, and conflict processes, we argue that civil wars erode interethnic trust and highly fractionalized societies pay an especially high price, as they rely heavily on interethnic business relations. We use the synthetic control method to construct appropriate counterfactuals and measure the economic impact of civil war. Our focus is on the years of armed conflict in a sample of 20 countries for which we observe an average annual loss of local GDP per capita of 17.5%, though with remarkable variation across cases. The empirical analysis provides supporting evidence in the form of a robust positive association between ethnic fractionalization and our measures of war-induced economic costs.
AB - There is a consensus that civil wars entail enormous economic costs, but there is little systematic analysis of the determinants of their heterogeneous destructiveness. Moreover, reliably estimating these costs has proven challenging, due to the complexity of the relationship between violence and socio-economic conditions. In this article, we study the effect of ethnic fractionalization of war-torn countries on the economic consequences of civil war. Building on an emerging literature on the relationships between ethnicity, trust, economic outcomes, and conflict processes, we argue that civil wars erode interethnic trust and highly fractionalized societies pay an especially high price, as they rely heavily on interethnic business relations. We use the synthetic control method to construct appropriate counterfactuals and measure the economic impact of civil war. Our focus is on the years of armed conflict in a sample of 20 countries for which we observe an average annual loss of local GDP per capita of 17.5%, though with remarkable variation across cases. The empirical analysis provides supporting evidence in the form of a robust positive association between ethnic fractionalization and our measures of war-induced economic costs.
KW - costs of civil war
KW - ethnic fractionalization
KW - synthetic control method
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U2 - 10.1177/0022343316675200
DO - 10.1177/0022343316675200
M3 - Article
AN - SCOPUS:85011579301
VL - 54
SP - 80
EP - 98
JO - Journal of Peace Research
JF - Journal of Peace Research
SN - 0022-3433
IS - 1
ER -