The Economic Welfare Cost of Conflict: An Empirical Assessment

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The Economic Welfare Cost of Conflict: An Empirical Assessment

Author Info

Gregory D. Hess (Claremont McKenna College and CESifo)

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Gregory Dawson Hess

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, our measure is quite a lower bound for the true and more encompassing welfare loss from living in a non-peaceful world. Remarkably, however, even these pure economic welfare losses from conflict are large. We find that, on average, individuals would give up over 8 percent of their current level of consumption to live in a peaceful world. Such large potential welfare gains from reducing warfare should make economists and policy-makers take note.

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Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2002-08.

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Date of creation: Jul 2002
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Handle: RePEc:clm:clmeco:2002-08

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Paper
- Gregory D. Hess, 2003. "The Economic Welfare Cost of Conflict: An Empirical Assessment," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]

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

This paper has been announced in the following NEP Reports:

NEP-ALL-2002-07-21 (All new papers)
NEP-PBE-2002-07-21 (Public Economics)

References listed on IDEAS
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Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November. [Downloadable!] (restricted)
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.
Other versions:
- Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July. [Downloadable!] (restricted)

Full references

Cited by:
(explanations, 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.)

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!]
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!]
Other versions:
- Michael McBride & Stergios Skaperdas, 2005. "Explaining Conflict in Low-Income Countries: Incomplete Contracting in the Shadow of the Future," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Robert J. Barro, 2007. "Rare Disasters, Asset Prices, and Welfare Costs," NBER Working Papers 13690, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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!]
Reuven Glick & Alan M. Taylor, 2005. "Collateral damage: trade disruption and the economic impact of war," Working Paper Series 2005-11, Federal Reserve Bank of San Francisco. [Downloadable!]
Other versions:
- Reuven Glick & Alan M. Taylor, 2005. "Collateral Damage: Trade Disruption and the Economic Impact of War," NBER Working Papers 11565, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- 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)
Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2005. "Globalization and Domestic Conflict," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Other versions:
- Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2006. "Globalization and Domestic Conflict," Working Papers 050601, University of California-Irvine, Department of Economics. [Downloadable!]
- Michelle R. Garfinkel & Stergios Skaperdas & Constantinos Syropoulos, 2005. "Globalization and Domestic Conflict," International Trade 0507005, EconWPA. [Downloadable!]
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!]
S. Brock Blomberg & Gregory Hess, 2004. "How Much Does Violence Tax Trade?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Other versions:
- S. Brock Blomberg & Gregory D Hess, 2006. "How Much Does Violence Tax Trade?," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 599-612, October. [Downloadable!] (restricted)
S. Brock Blomberg & Gregory Hess & Athanasios Orphanides, 2004. "The Macroeconomic Consequences of Terrorism," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
Other versions:
- S. Brock Blomberg & Gregory D. Hess & Athanasios Orphanides, 2004. "The Macroeconomic Consequences of Terrorism," Macroeconomics Working Papers 100, East Asian Bureau of Economic Research. [Downloadable!]
- Blomberg, S. Brock & Hess, Gregory D. & Orphanides, Athanasios, 2004. "The macroeconomic consequences of terrorism," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1007-1032, July. [Downloadable!] (restricted)
Stergios Skaperdas, 2007. "An Economic Approach to Analyzing Civil War," Working Papers 060715, University of California-Irvine, Department of Economics. [Downloadable!]
Other versions:
- Stergios Skaperdas, 2008. "An economic approach to analyzing civil wars," Economics of Governance, Springer, vol. 9(1), pages 25-44, January. [Downloadable!] (restricted)

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