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On the economic costs of political instabilities: a tale of sub-Saharan Africa

Author

Listed:
  • Joe Maganga Zonda

    (National Dong Hwa University)

  • Chang-Ching Lin

    (National Cheng Kung University)

  • Ming-Jen Chang

    (National Dong Hwa University)

Abstract

The relationship between political instability (PI) and economic development has been extensively debated in the social sciences, yielding contrasting empirical results. In this article, we synergise two novel techniques—synthetic control (SC) and matrix completion (MC)—to study the economic effects of PI events on the sub-Saharan African scene. Our identification strategies capture potential spatial and temporal heterogeneities of treatment effects. We show that PI inflicts statistically and economically significant collateral damage, albeit heterogeneous across economies and over time. Notably, the group average treatment effect on the treated (ATT) reveals output shrinkage of approximately 17–20 percentage points. Exploiting the temporal dimension of the two techniques, we find that although output loss persists into the long run, the bulk of the damage is wrecked in the short run. This finding particularly casts doubt on the full economic recovery hypothesis in the near aftermath of a PI episode. Furthermore, we unearth spatial heterogeneities of the effects where we show that the negative effects are disproportionately more pronounced for economies which experience protracted PI episodes. Lastly, our paper demonstrates that while both methods provide reliable counterfactuals, the MC estimator yields significantly better pre-treatment fit in our data than the SC framework.

Suggested Citation

  • Joe Maganga Zonda & Chang-Ching Lin & Ming-Jen Chang, 2024. "On the economic costs of political instabilities: a tale of sub-Saharan Africa," Empirical Economics, Springer, vol. 66(1), pages 137-173, January.
  • Handle: RePEc:spr:empeco:v:66:y:2024:i:1:d:10.1007_s00181-023-02452-4
    DOI: 10.1007/s00181-023-02452-4
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    More about this item

    Keywords

    Political instability; Economic recovery; Economic growth; Sub-Saharan Africa; Matrix completion; Synthetic control;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State

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