The economic costs of civil war: Synthetic counterfactual evidence and the effects of ethnic fractionalization

Stefano Costalli, Luigi Moretti, Costantino Pischedda

Research output: Contribution to journalArticle

10 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)80-98
Number of pages19
JournalJournal of Peace Research
Volume54
Issue number1
DOIs
StatePublished - Jan 1 2017

Keywords

  • costs of civil war
  • ethnic fractionalization
  • synthetic control method

ASJC Scopus subject areas

  • Sociology and Political Science
  • Safety Research
  • Political Science and International Relations

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