How Internal Violence Lowers Economic Growth: A Theoretical and Empirical Study

Ibrahima Diallo

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we introduce a new variable called Internal Violence Index (IVI) and study its effects on economic growth both theoretically and empirically. The first part builds a stochastic endogenous growth model which demonstrates that Internal Violence harms economic growth. On the theoretical side, this paper is the first to introduce a fully-micro-founded endogenous economic growth model that illustrates the explicit effect of Internal Violence on long-run growth in a stochastic dynamic optimization in continuous time framework. On the empirical side, this paper is also the first to employ Linear Regressions and Instrumental Variables Estimations techniques to empirically study the impact of Internal Violence on economic growth. The empirical results corroborate the theoretical predictions that Internal Violence acts negatively on economic growth. The negative impact of Internal Violence on growth are maintained when we use alternative measurements of Internal Violence and subsamples of Least Developed Countries (LDCs) and Non Least Developed Countries.

Keywords: Linear Regressions; Instrumental Variables Estimations; Endogenous Growth Theory; Stochastic Dynamic Optimization in Continuous Time; Internal Violence Index; Internal Armed Conflict, Criminality, Terrorism, Political Violence (search for similar items in EconPapers)
JEL-codes: C61 C63 K14 O41 O47 O50 (search for similar items in EconPapers)
Date: 2018-08-01
New Economics Papers: this item is included in nep-gro
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:88285

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