War and Economic Performance

Vally Koubi
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Vally Koubi: Center for International Studies, Swiss Federal Institute of Technology; Department of Economics, University of Bern

Journal of Peace Research, 2005, vol. 42, issue 1, 67-82

Abstract: This article studies the consequences of inter-and intrastate wars for economic growth in a large cross-section of countries during the period 1960–89. It establishes that cross-country differences in economic growth are systematically related to the severity and duration of war. The combined prewar, contemporaneous, and postwar association between growth and war is negative; that is, economic performance has been lower in countries that fought a severe and/or prolonged war. However, the causal effect of war on postwar economic performance is positive. In particular, the longer or more severe the war, the higher the subsequent long-term rate of economic growth. A possible interpretation of these findings is that war is more likely to occur in poorly performing countries and/or to have a negative direct – contemporaneous – effect on growth. But in the longer term, war creates growth-enhancing possibilities. Interestingly, these effects arise mostly from civil wars and are quantitatively quite substantial. For instance, an increase in war duration by 10% leads to an increase of 2.1% in the average growth rate. The findings of this article are thus consistent with the predictions of the theories of both Organski & Kugler and Olson.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:sae:joupea:v:42:y:2005:i:1:p:67-82

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