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The Economic Welfare Cost of Conflict: An Empirical Assessment

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Author Info
Gregory D. Hess (Claremont McKenna College and CESifo)

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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, 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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Publisher Info
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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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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Cited by:
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  1. 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 Group Munich. [Downloadable!]
    Other versions:
  2. 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:
  3. 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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  4. 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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  5. 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!]
  6. 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)
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  7. 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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  8. 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!]
  9. 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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  10. 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!]
  11. 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!]
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  12. 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!]
    Other versions:
  13. 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!]
  14. 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, revised May 2009. [Downloadable!]
    Other versions:
  15. 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!]
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