The Economic Costs of Conflict: A Case Study of the Basque Country

Alberto Abadie and Javier Gardeazabal

American Economic Review, 2003, vol. 93, issue 1, 113-132

Abstract: This article investigates the economic effects of conflict, using the terrorist conflict in the Basque Country as a case study. We find that, after the outbreak of terrorism in the late 1960's, per capita GDP in the Basque Country declined about 10 percentage points relative to a synthetic control region without terrorism. In addition, we use the 1998-1999 truce as a natural experiment. We find that stocks of firms with a significant part of their business in the Basque Country showed a positive relative performance when truce became credible, and a negative relative performance at the end of the cease-fire.

Date: 2003
Note: DOI: 10.1257/000282803321455188
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