Working Paper 197 - Estimating the Economic Cost of Fragility in Africa

A fiscally constrained global environment has heightened the interest of development partners in the economic cost of fragility. State fragility and civil war have become a central topic in the development debate and Africa is a continent particularly affected by fragility. A stronger engagement with fragile states is one of three areas of special emphasis in the African Development Bank’s Ten Year Strategy 2014-2022.This paper evaluates and quantifies the economic costs of fragility using two approaches: a simple convergence model and synthetic counterfactual approach. To the best of our knowledge, this paper is the first to use the synthetic counterfactual approach to evaluate the economic costs of fragility in Africa. Our estimations show that fragile states lose an opportunity to double their initial GDP per capita after a period of 20 years. Second, the synthetic counterfactual shows that in 20 years of fragility, the cumulative economic cost of fragility in Liberia, Sierra Leone and Burundi amounted toUS$31.8 billion, US$16.0 billion and US$12.8 billion respectively. Our simulations suggest, for example, that if Central Africa Republic, Liberia and Sierra Leone had growth rates equivalent to those of the synthetic country in the model in 2010, it would take 34.5 years,19.2 years and 20.8 years respectively to recover the level of GDP per capita had these countries not been exposed to fragility.