The Economic Costs of Conflict: A Production Network Approach

Mathieu Couttenier, Nathalie Monnet and Lavinia Piemontese

No 16984, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: A novel approach is presented for estimating the economic costs of conflict, in which the production network serves a first-order mechanism through which the disruptive effect of localized conflict spreads to firms in peaceful areas. The method is applied to the Maoist insurgency in Eastern India during the period 2000-2009. We document the negative impact of conflict on firms' behavior, which spreads to firms in peaceful areas through input-output connections. We then apply a model of production networks in order to quantify the overall impact of conflict by taking these propagation effects into account. We find that the Maoist insurgency results in an average aggregate output loss of 3.8 billion USD per year. Interestingly, 73% of the loss is explained by network propagation.

Keywords: Conflict; Firms; Production network; Aggregate output loss (search for similar items in EconPapers)
JEL-codes: D22 D74 O12 O47 (search for similar items in EconPapers)
Date: 2022-01
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Working Paper: The Economic Costs of Conflict: A Production Network Approach (2024)
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