Civil war and the economies of the peace dividend

Paul Collier

No 1995-08, CSAE Working Paper Series from Centre for the Study of African Economies, University of Oxford

Abstract: Civil wars dramatically reduce income. Peace might therefore be expected to generate a dividend which both the government and the private sector can spend. Paradoxically, those civil wars which are prolonged and therefore do most damage create only small instant peace dividends. Income has fallen because capital has been lost and so cannot recover until capital has been reaccumulated. However, some of the capital losses are reverable. Once confidence in a secure environment is restored there is a delayed peace dividend as private capital is repatriated and `social capital' is rebuilt. Postwar governments should therefore focus not upon how to spend an illusory early dividend, but on how to restore private confidence.

Date: 1995
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