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Estimating the direct costs of social conflicts: road blockings in Bolivia

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  • Vincenzo Verardi
  • Bruno De Borger

Abstract

Social conflicts are a serious obstacle to economic growth in many Latin American societies, affecting economic activity both in the short- and the long-run. The purpose of this paper is twofold. First, we develop a methodology to estimate the direct, short-run impact of frequently occurring exponents of local conflicts (such as road blockings) on economic activity. The methodology is based on using high frequency (daily) data to estimate the relation between a proxy for economic activity and a proxy for local social conflicts. Careful analysis of impulse-response functions traces the effect of local social conflicts on economic activity. This information is combined with the aggregate annual time series relation between GDP and the high frequency proxy for economic activity to estimate the direct cost of local social conflicts for the economy as a whole. Second, we apply the proposed methodology to analyze the direct economic costs of road blockings in Bolivia, using detailed daily information for the year 2003. The results show that the direct costs of road blocking are large. Stronger institutions are a critical factor in reducing the prevalence of such conflicts and to avoid the huge economic costs that they imply.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/9915.

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Date of creation: 2007
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Handle: RePEc:ulb:ulbeco:2013/9915

Note: Conference paper presented at: (11-13 julio 2007: Cochabamba)
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  1. Alesina, Alberto F & Rodrik, Dani, 1991. "Distributive Politics and Economic Growth," CEPR Discussion Papers 565, C.E.P.R. Discussion Papers.
  2. Vincenzo Verardi, 2004. "Electoral systems, racial tension and decentralization," ULB Institutional Repository 2013/9895, ULB -- Universite Libre de Bruxelles.
  3. Shah, Anwar, 1998. "Balance, accountability, and responsiveness : lessons about decentralization," Policy Research Working Paper Series 2021, The World Bank.
  4. Laurent Bouton & Marjorie Gassner & Vincenzo Verardi, 2008. "Redistributing income under fiscal vertical imbalance," ULB Institutional Repository 2013/9905, ULB -- Universite Libre de Bruxelles.
  5. Vogelsang, T.I. & Perron, P., 1991. "Nonstationary and Level Shifts With An Application To Purchasing Power Parity," Papers 359, Princeton, Department of Economics - Econometric Research Program.
  6. Michael Faye & John McArthur & Jeffrey Sachs & Thomas Snow, 2004. "The Challenges Facing Landlocked Developing Countries," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 5(1), pages 31-68.
  7. Easterly, William & Kremer, Michael & Pritchett, Lant & Summers, Lawrence H., 1993. "Good policy or good luck?: Country growth performance and temporary shocks," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 459-483, December.
  8. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  9. Verardi, Vincenzo, 2005. "Electoral systems and income inequality," Economics Letters, Elsevier, vol. 86(1), pages 7-12, January.
  10. Faguet, Jean-Paul, 2004. "Does decentralization increase government responsiveness to local needs?: Evidence from Bolivia," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 867-893, March.
  11. Knack, Stephen & Keefer, Philip, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1251-88, November.
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