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Civil conflict and firm performance : evidence from Cote d'Ivoire

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  • Klapper, Leora
  • Richmond, Christine
  • Tran, Trang

Abstract

This paper investigates the impact of political instability and civil conflict on firms. It studies the unrest in Cote d'Ivoire that began in 2000, using a census of all registered firms for the years 1998-2003. The analysis uses structural estimates of the production function and exploits spatial variations in conflict intensity to derive the cost of conflict on firms in terms of productivity loss. The results indicate that the conflict led to an average 16-23 percent drop in firm total factor productivity and the decline is 5-10 percentage points larger for firms that are owned by or employing foreigners. These results are consistent with anecdotal evidence of increasing violent attacks and looting of foreigners and their businesses during the conflict. The results suggest increases in operating costs is a possible channel driving this impact. Finally, the paper investigates whether firms responded by hiring fewer foreign workers and finds evidence supporting this hypothesis.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6640.

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Date of creation: 01 Oct 2013
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Handle: RePEc:wbk:wbrwps:6640

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Keywords: Economic Theory&Research; Labor Policies; Microfinance; E-Business; Post Conflict Reconstruction;

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  1. Nina Pavcnik, 2002. "Trade Liberalization, Exit, and Productivity Improvements: Evidence from Chilean Plants," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 245-276.
  2. Easterly, William & Levine, Ross, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, MIT Press, vol. 112(4), pages 1203-50, November.
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  4. Shiferaw, Admasu, 2009. "Survival of Private Sector Manufacturing Establishments in Africa: The Role of Productivity and Ownership," World Development, Elsevier, vol. 37(3), pages 572-584, March.
  5. Kosuke Imai & Jeremy M. Weinstein, 2000. "Measuring the Economic Impact of Civil War," CID Working Papers 51, Center for International Development at Harvard University.
  6. Mary Hallward-Driemeier & Bob Rijkers, 2013. "Do Crises Catalyze Creative Destruction? Firm-level Evidence from Indonesia," The Review of Economics and Statistics, MIT Press, vol. 95(5), pages 1788-1810, December.
  7. Amiti, Mary & Konings, Jozef, 2005. "Trade Liberalization, Intermediate Inputs and Productivity: Evidence from Indonesia," CEPR Discussion Papers 5104, C.E.P.R. Discussion Papers.
  8. Ksoll, Christopher & Macchiavello, Rocco & Morjaria, Ameet, 2010. "The Effect of Ethnic Violence on an Export-Oriented Industry," CEPR Discussion Papers 8074, C.E.P.R. Discussion Papers.
  9. Camacho, Andriana & Rodriguez, Catherine, 2010. "Firm Exit and Armed Conflict in Colombia," Working Paper Series wp2010-94, World Institute for Development Economic Research (UNU-WIDER).
  10. Collier,Paul & Duponche, Marguerite, 2010. "The Economic Legacy of Civil War: Firm Level Evidence from Sierra Leone," Working Paper Series wp2010-90, World Institute for Development Economic Research (UNU-WIDER).
  11. Frazer, Garth, 2005. "Which Firms Die? A Look at Manufacturing Firm Exit in Ghana," Economic Development and Cultural Change, University of Chicago Press, vol. 53(3), pages 585-617, April.
  12. Nicholas Bloom & Aprajit Mahajan & David McKenzie & John Roberts, 2010. "Why Do Firms in Developing Countries Have Low Productivity?," American Economic Review, American Economic Association, vol. 100(2), pages 619-23, May.
  13. Sleuwaegen, Leo & Goedhuys, Micheline, 2002. "Growth of firms in developing countries, evidence from Cote d'Ivoire," Journal of Development Economics, Elsevier, vol. 68(1), pages 117-135, June.
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