The Macroeconomic Impact of Social Unrest

Metodij Hadzi-Vaskov, Samuel Pienknagura and Luca Ricci

No 16152, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper explores the macroeconomic impact of social unrest, using a novel index based on news reports. The findings are threefold. First, unrest has an adverse effect on economic activity, with GDP remaining on average 0.2 percentage points below the pre-shock baseline six quarters after a one-standard deviation increase in the unrest index. This is driven by sharp contractions in manufacturing and services (sectoral dimension), and consumption (demand dimension). Second, unrest lowers confidence and raises uncertainty; however, its adverse effect on GDP can be mitigated by strong institutions and by a country's policy space. Third, an unrest event, which is captured by a large change in the unrest index, is associated with a 1 percentage point reduction in GDP six quarters after the event. Impacts differ by type of event: episodes motivated by socio-economic reasons result in sharper GDP contractions compared to those associated with politics/elections, and events triggered by a combination of both factors lead to sharpest contractions. Results are not driven by countries with adverse growth trajectories prior to unrest events or by fiscal consolidations, and are robust to instrumenting via regional unrest.

Keywords: Social unrest; Economic activity; Growth; Institutions; Policy space (search for similar items in EconPapers)
JEL-codes: D74 F50 O11 O47 (search for similar items in EconPapers)
Date: 2021-05
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The Macroeconomic Impact of Social Unrest (2023)
Working Paper: The Macroeconomic Impact of Social Unrest (2021)
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