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The Economic Welfare Cost of Conflict: An Empirical Assessment

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Author Info
Gregory D. Hess

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Abstract

War, whether external or internal, large or small, is a costly endeavor. Loss of life, loss of close friends or family, and the destruction of material possessions all play a part in the costs of war. The purpose of this paper is to capture only the material, economic welfare costs of conflict stemming from the altered path of consumption resulting from conflict. As such, the measure is quite a lower bound for the true and more encompassing welfare loss from living in a non-peaceful world. But how much would individual be willing to pay to avoid just the economic costs of conflict? Remarkably, even these pure economic welfare losses from conflict are quite large. I find that, on average, individuals who live in a country that has experienced some conflict during the 1960-1992 sample would permanently give up to approximately 8 percent of their current level of consumption to live in a purely peaceful world. Such large potential welfare gains from reducing warfare should make economists and policy-makers take note, and continue to investigate and advocate for domestic and international institutions to realize such gains.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 852.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_852

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Related research
Keywords: growth; conflict; welfare costs;

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Find related papers by JEL classification:
E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November. [Downloadable!] (restricted)
  2. Pasaran, M.H. & Im, K.S. & Shin, Y., 1995. "Testing for Unit Roots in Heterogeneous Panels," Cambridge Working Papers in Economics 9526, Faculty of Economics, University of Cambridge.
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  1. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2005. "Globalization and Domestic Conflict," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  2. Glick, Reuven & Taylor, Alan M, 2005. "Collateral Damage: Trade Disruption and the Economic Impact of War," CEPR Discussion Papers 5209, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Nico Voigtländer & Joachim Voth, 2008. "The Three Horsemen of Growth: Plague, War and Urbanization in Early Modern Europe," Economics Working Papers 1115, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
    Other versions:
  4. Michael Ben-Gad & Yakov Ben-Haim & Dan Peled, 2008. "Allocating Security Expenditures under Knightian Uncertainty: an Info-Gap Approach," City University Economics Discussion Papers 08/05, Department of Economics, City University, London. [Downloadable!]
  5. Patricia Justino, 2009. "The Impact of Armed Civil Conflict on Household Welfare and Policy Responses," Research Working Papers 12, MICROCON - A Micro Level Analysis of Violent Conflict. [Downloadable!]
  6. Michael McBride & Stergios Skaperdas, 2005. "Explaining Conflict in Low-Income Countries: Incomplete Contracting in the Shadow of the Future," Working Papers 050606, University of California-Irvine, Department of Economics. [Downloadable!]
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  7. Patricia Justino, 2006. "On the Links between Violent Conflict and Chronic Poverty: How Much Do We Really Know?," HiCN Working Papers 18, Households in Conflict Network. [Downloadable!]
  8. S. Brock Blomberg & Gregory Hess, 2004. "How Much Does Violence Tax Trade?," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  9. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2009. "International Trade and Transnational Insecurity: How Comparative Advantage and Power are Jointly Determined," Working Papers 080921, University of California-Irvine, Department of Economics. [Downloadable!]
    Other versions:
  10. S. Brock Blomberg & Gregory Hess & Athanasios Orphanides, 2004. "The Macroeconomic Consequences of Terrorism," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  11. Michelle R. Garfinkel & Stergios Skaperdas, 2006. "Economics of Conflict: An Overview," Working Papers 050623, University of California-Irvine, Department of Economics, revised Sep 2006. [Downloadable!]
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  12. Stergios Skaperdas, 2007. "An Economic Approach to Analyzing Civil War," Working Papers 060715, University of California-Irvine, Department of Economics. [Downloadable!]
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  13. Robert J. Barro, 2007. "Rare Disasters, Asset Prices, and Welfare Costs," NBER Working Papers 13690, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  14. Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2008. "Globalization and Insecurity: Reviewing Some Basic Issues," Working Papers 080901, University of California-Irvine, Department of Economics. [Downloadable!]
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