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The Effect of Armed Conflict on Savings Rates: International Evidence from 1980 to 2015

Torres-Garcia Alejandro (), Vanegas-Arias Martin and Builes-Aristizabal Laura
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Torres-Garcia Alejandro: School of Economics and Finance, Universidad EAFIT, Cra 49 N 7 sur 50, Medellín, Colombia
Builes-Aristizabal Laura: Economist, School of Economics and Finance, Universidad EAFIT, Medellin, Colombia

Authors registered in the RePEc Author Service: Alejandro Torres García ()

Peace Economics, Peace Science, and Public Policy, 2019, vol. 25, issue 3, 13

Abstract: Economic growth theory highlights the importance of saving rates to explain the long-run economic performance of economies. While economic theory has provided an analytical and empirical framework to understand the determinants of saving rates, one of the limitations is that it excludes from the analysis the potential effects of armed conflict and political instability, although it has been demonstrated that such situations can affect intertemporal preferences in terms of consumption and saving. Using a sample of 55 countries with/without conflict from 1980 to 2015, we analyze whether aggregate savings rates are negatively correlated with the existence, intensity, and duration of an armed conflict. The results indicate that countries that have suffered some type of conflict exhibit a saving rate 2.7% lower on average than the rate exhibited by countries that have not suffered such conflict. Additionally, if there is a high-intensity conflict, the saving rates decreases 2.5% more relative to countries that experience low-intensity conflict. Finally, we found a nonlinear relationship between saving rates and conflict duration, suggesting that the impact of conflict on savings decreases with time. These results extend the literature on the effects of armed conflicts on the long-run economic growth.

Keywords: armed conflict; civil war; saving determinants; saving rates; time preferences (search for similar items in EconPapers)
JEL-codes: D15 D74 D91 E21 (search for similar items in EconPapers)
Date: 2019
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