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

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  • Diallo, Ibrahima Amadou

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.

Suggested Citation

  • Diallo, Ibrahima Amadou, 2018. "How Internal Violence Lowers Economic Growth: A Theoretical and Empirical Study," MPRA Paper 88285, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:88285
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    References listed on IDEAS

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    More about this item

    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;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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