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The impact of armed conflict on firms’ performance and perceptions

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Author Info

  • Carly Petracco

    (EBRD)

  • Helena Schweiger

    ()
    (EBRD)

Abstract

This study is the first to explore the short-run impact of armed conflict on firms’ performance and their perceptions of the business environment. We focus on the August 2008 conflict between Georgia and Russia and use the Business Environment and Enterprise Performance Survey data before and after this armed conflict. We can exploit the variation in armed conflict exposure to identify these relationships. The difference-in-differences estimates suggest that despite the short duration, armed conflict had a significant and negative impact on exports, sales and employment for at least a subset of firms. Perceptions of a few business environment obstacles were also affected, but not necessarily negatively. The results suggest that young firms experienced a scarring effect, which could lead them to close down prematurely. Longer-term impacts of the conflict on firms’ performance and local economic development can therefore not be ruled out.

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Bibliographic Info

Paper provided by European Bank for Reconstruction and Development, Office of the Chief Economist in its series Working Papers with number 152.

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Length: 49 pages
Date of creation: Dec 2012
Date of revision:
Publication status: Published in Working papers 152, European Bank for Reconstruction and Development
Handle: RePEc:ebd:wpaper:152

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Keywords: Armed conflict; Georgia; business climate; firm performance;

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