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Economic consequences of war: Evidence from Sri Lanka

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  • Ganegodage, K. Renuka
  • Rambaldi, Alicia N.

Abstract

We propose a theoretical and econometric framework to evaluate the impact of war on economic growth of a developing country with an open economy. The theoretical framework encompasses both the neoclassical and endogenous growth models. We test this framework using Sri Lankan data. The war had significant and negative effects both in the short and long-run (annual average of 9% of GDP). High returns from investment in physical capital did not translate in sizable positive externalities. Only short-run significant effects of openness on growth are found. Inconsistent politically driven policies towards openness are the likely reason.

Suggested Citation

  • Ganegodage, K. Renuka & Rambaldi, Alicia N., 2014. "Economic consequences of war: Evidence from Sri Lanka," Journal of Asian Economics, Elsevier, vol. 30(C), pages 42-53.
  • Handle: RePEc:eee:asieco:v:30:y:2014:i:c:p:42-53 DOI: 10.1016/j.asieco.2013.12.001
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    Cited by:

    1. Lopes da Fonseca, Mariana & Baskaran, Thushyanthan, 2015. "Re-evaluating the economic costs of conflicts," Center for European, Governance and Economic Development Research Discussion Papers 246, University of Goettingen, Department of Economics.

    More about this item

    Keywords

    Conflict; Growth; Returns to investment;

    JEL classification:

    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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