Caught in a Trap: Simulating the Economic Consequences of Internal Armed Conflict

Joan Margalef and Hannes Mueller

No 1402, Working Papers from Barcelona School of Economics

Abstract: This study proposes a statistical model to capture the economic impact of the "conflict trap" phenomenon – a period of recurring outbreaks of internal armed conflict. The framework captures conflict dynamics through a discrete-time Markov process. We estimate the transition matrix and link the states to GDP per capita growth distributions through country fixed effects regressions. This allows for simulating the distribution of developmental effects of the conflict trap. We find that the trap has a large detrimental effect on long-term economic development, reaching a relative decline of GDP per capita of over 50% in the most affected countries.

Keywords: economic growth; Economic development; armed conflict; conflict trap (search for similar items in EconPapers)
JEL-codes: D74 O11 O40 (search for similar items in EconPapers)
Date: 2023-09
New Economics Papers: this item is included in nep-gro
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