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Caught in a Trap: Simulating the Economic Consequences of Internal Armed Conflict

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Listed:
  • Joan Margalef
  • Hannes Mueller

Abstract

This study proposes a statistical model to capture the economic impact of the "conflict trap" phenomenon – a period of recurring outbreaks of internal armed conflict. The framework captures conflict dynamics through a discrete-time Markov process. We estimate the transition matrix and link the states to GDP per capita growth distributions through country fixed effects regressions. This allows for simulating the distribution of developmental effects of the conflict trap. We find that the trap has a large detrimental effect on long-term economic development, reaching a relative decline of GDP per capita of over 50% in the most affected countries.

Suggested Citation

  • Joan Margalef & Hannes Mueller, 2023. "Caught in a Trap: Simulating the Economic Consequences of Internal Armed Conflict," Working Papers 1402, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:1402
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    References listed on IDEAS

    as
    1. Timothy Besley & Hannes Mueller, 2012. "Estimating the Peace Dividend: The Impact of Violence on House Prices in Northern Ireland," American Economic Review, American Economic Association, vol. 102(2), pages 810-833, April.
    2. Nicolas Berman & Mathieu Couttenier & Dominic Rohner & Mathias Thoenig, 2017. "This Mine Is Mine! How Minerals Fuel Conflicts in Africa," American Economic Review, American Economic Association, vol. 107(6), pages 1564-1610, June.
    3. Paul Collier & V. L. Elliott & Håvard Hegre & Anke Hoeffler & Marta Reynal-Querol & Nicholas Sambanis, 2003. "Breaking the Conflict Trap : Civil War and Development Policy," World Bank Publications - Books, The World Bank Group, number 13938.
    4. Tapsoba, Augustin, 2023. "The cost of fear: Impact of violence risk on child health during conflict," Journal of Development Economics, Elsevier, vol. 160(C).
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    Keywords

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    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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