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Some economic consequences of the transition from civil war to peace

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  • Azam, Jean-Paul
  • Bevan, David
  • Collier, Paul
  • Dercon, Stefan
  • Gunning, Jan
  • Pradhan, Sanjay

Abstract

Drawing on evidence from Africa - especially Ethiopia and Uganda - the authors of this volume draw conclusions about economic policy in the aftermath of civil war. A sample of conclusions follows. Civil wars differ from international wars. They are informal, often have no clear beginning and end, weaken rather than strengthen the authority of the state, and leave two unreconciled armies to be demobilized within one territory. Civil wars erode the institutions of civil society, leading to a decline in the stock of social capital, which takes some time to restore. Private investment and government revenue are slow to recover, and military expenditures are not easily reduced. As a result, there is little or no peace dividend in the short run. The period of transition to peace is a particularly suitable time for radical policy reform, despite the high degree of polarization typical in countries engaged in civil war. And speedy reform, far from increasing uncertainty, is likely to reduce it. After a civil war, private agents are fearful both of each other and of the government. This, perhaps even more than physical damage to infrastructure, hinders private-sector-led recovery, as irreversible investment is delayed despite being financeable. The transition to peace is primarily the transition from fear and the defensive responses that became ingrained in wartime. The peace dividend comes as a gradual recovery of confidence induces repatriation of financial and human capital. Such confidence can be boosted by the early sequencing of investment-sensitive policy reforms and by preserving low inflation through direct consumer price index targeting. Lack of confidence can be compensated for by temporary undervaluation of the exchange rate, or however, may prove more difficult to make credibly time-bound. Finally, aid can permit accelerated rehabilitation of the infrastructure (especially transport networks) needed to return to a market economy. Contrary to the studies hypothesis, the authors found that demobilization - at least in Uganda - did not lead to a significant upsurge in insecurity. In the short term, demobilization significantly reduced crime, unless the demobilized lacked access to land. If the demobilized returned to their home areas and were given some assistance, with identifiable exceptions they were able to find income-earning opportunities.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1392.

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Date of creation: 01 Dec 1995
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Handle: RePEc:wbk:wbrwps:1392

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Keywords: Debt Markets; Emerging Markets; Economic Theory&Research; Investment and Investment Climate;

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  1. van Wijnbergen, Sweder, 1990. "Trade reform, policy uncertainty, and the current account," Policy Research Working Paper Series 520, The World Bank.
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Cited by:
  1. Mehlum, Halvor & Moene, Karl-Ove & Torvik, Ragnar, 2003. "Plunder & Protections Inc," Memorandum, Oslo University, Department of Economics 10/2002, Oslo University, Department of Economics.
  2. 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.
  3. Paul Collier, 1995. "Civil war and the economies of the peace dividend," Economics Series Working Papers, University of Oxford, Department of Economics WPS/1995-08, University of Oxford, Department of Economics.
  4. Stefan Dercon, 2001. "Economic reform, growth and the poor: evidence from rural Ethiopia," CSAE Working Paper Series 2001-08, Centre for the Study of African Economies, University of Oxford.
  5. Tilman Brück, . "Macroeconomic Effects of the War in Mozambique -," QEH Working Papers, Queen Elizabeth House, University of Oxford qehwps11, Queen Elizabeth House, University of Oxford.
  6. Kimbambu Tsasa Vangu, Jean - Paul, 2012. "Analyse de la Relation Guerres Civiles et Croissance Économique
    [Civil Wars and Economic Growth in DRC]
    ," MPRA Paper 42424, University Library of Munich, Germany, revised 05 Feb 2012.
  7. Piffaretti, Nadia F., 2010. "From Rent-seeking to Profit-creation: Private Sector Development and Economic Turnaround in Fragile States," MPRA Paper 26558, University Library of Munich, Germany.
  8. Dercon, Stefan & Ayalew, Daniel, 1998. "Where have all the soldiers gone: Demobilization and reintegration in Ethiopia," World Development, Elsevier, Elsevier, vol. 26(9), pages 1661-1675, September.
  9. Paul Collier, 1995. "Civil war and the economies of the peace dividend," CSAE Working Paper Series 1995-08, Centre for the Study of African Economies, University of Oxford.

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