The economic costs of civil war: Synthetic counterfactual evidence and the effects of ethnic fractionalization

Costalli Stefano, Luigi Moretti and Pischedda Costantino
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Costalli Stefano: University of Essex, Catholic University - Milano
Pischedda Costantino: University of Miami [Coral Gables]

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Abstract: There is a consensus that civil wars entail enormous economic costs, but there is little systematic analysis of the determinants of their heterogeneous destructiveness. Moreover, reliably estimating these costs has proven challenging, due to the complexity of the relationship between violence and socio-economic conditions. In this article, we study the effect of ethnic fractionalization of war-torn countries on the economic consequences of civil war. Building on an emerging literature on the relationships between ethnicity, trust, economic outcomes, and conflict processes, we argue that civil wars erode interethnic trust and highly fractionalized societies pay an especially high price, as they rely heavily on interethnic business relations. We use the synthetic control method to construct appropriate counterfactuals and measure the economic impact of civil war. Our focus is on the years of armed conflict in a sample of 20 countries for which we observe an average annual loss of local GDP per capita of 17.5%, though with remarkable variation across cases. The empirical analysis provides supporting evidence in the form of a robust positive association between ethnic fractionalization and our measures of war-induced economic costs.

Keywords: ethnic fractionalization; Synthetic control method; cost of civil war (search for similar items in EconPapers)
Date: 2017-01-24
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Published in Journal of Peace Research, 2017, 54 (1), pp.80-98. ⟨10.1177/0022343316675200⟩

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Related works:
Working Paper: The economic costs of civil war: Synthetic counterfactual evidence and the effects of ethnic fractionalization (2017)
Working Paper: The Economic Costs of Civil War: Synthetic Counterfactual Evidence and the Effects of Ethnic Fractionalization (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01445217

DOI: 10.1177/0022343316675200

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