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Does Conflict Disrupt Growth? Evidence of the Relationship between Political Instability and National Economic Performance

Author

Listed:
  • Polachek, Solomon

    (Binghamton University, New York)

  • Sevastianova, Daria

    (University of Southern Indiana)

Abstract

Current empirical growth models limit the determinants of country growth to geographic, economic, and institutional variables. This study draws on conflict variables from the Correlates of War (COW) project to ask a critical question: How do different types of conflict affect country growth rates? It finds that wars slow the economy. Estimates indicate that civil war reduces annual growth by .01 to .13 percentage points, and high-intensity interstate conflict reduces annual growth by .18 to 2.77 percentage points. On the other hand, low-intensity conflict slows growth much less than high-intensity conflict, and may slightly increase it. The detrimental effect of conflict on growth is intensified when examining non-democracies, low income countries, and countries in Africa.

Suggested Citation

  • Polachek, Solomon & Sevastianova, Daria, 2010. "Does Conflict Disrupt Growth? Evidence of the Relationship between Political Instability and National Economic Performance," IZA Discussion Papers 4762, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp4762
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    Cited by:

    1. Michal Rigel, 2020. "War and Philosophy: A Study of Mutual Interaction," E-LOGOS, Prague University of Economics and Business, vol. 2020(2), pages 46-56.
    2. Nicoletta Batini, 2019. "Macroeconomic Gains from Reforming the Agri-Food Sector: The Case of France," IMF Working Papers 2019/041, International Monetary Fund.
    3. Deng-Shan Wang & Yan Wang & Yifang Liu & Heng-fu Zou, 2009. "Optimal Military Spending, Trade and Stochastic Economic Growth," CEMA Working Papers 373, China Economics and Management Academy, Central University of Finance and Economics.
    4. Jorge Alvis Arrieta & Cristina Hidalgo Gonz�lez & Mar�a del Pilar Rodr�guez Fern�ndez, 2017. "Conflicto, posconflicto y capacidades de los gobiernos municipales en Colombia, 2002 - 2012," Revista Economía y Región, Universidad Tecnológica de Bolívar, vol. 11(2), pages 249-285.
    5. Arnab Biswas & Colin O’Reilly & James T. Bang & Aniruddha Mitra, 2016. "Civil war and economic growth: the case for a closer look at forms of mobilization," Applied Economics Letters, Taylor & Francis Journals, vol. 23(15), pages 1057-1061, October.
    6. Taiwo Akinlo & Omobola Hannah Arowolo & Taofeek Bidemi Zubair, "undated". "Political instability and economic growth in Nigeria," Review of Socio - Economic Perspectives 202209, Reviewsep.
    7. Ateba Boyomo Henri Aurélien & Mougnol A. Ekoula Herve William & Song Jacques Simon, 2024. "Migrant Remittances and Conflicts in Sub-Saharan African Countries: Effects and Transmission Channels," Journal of International Migration and Integration, Springer, vol. 25(4), pages 2361-2406, December.
    8. Volker Nitsch, 2019. "Passport, please! Travels, travails and trade," Applied Economics Letters, Taylor & Francis Journals, vol. 26(15), pages 1274-1278, September.
    9. 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.
    10. Olaf J de Groot & Carlos Bozzoli & Anousheh Alamir & Tilman Brück, 2022. "The global economic burden of violent conflict," Journal of Peace Research, Peace Research Institute Oslo, vol. 59(2), pages 259-276, March.
    11. Awaworyi Churchill, Sefa & Munyanyi, Musharavati Ephraim & Smyth, Russell & Trinh, Trong-Anh, 2021. "Early life shocks and entrepreneurship: Evidence from the Vietnam War," Journal of Business Research, Elsevier, vol. 124(C), pages 506-518.
    12. Olalekan Charles Okunlola, 2019. "Political Regime Types and Economic Development in Nigeria: Significance of Conflict and Corruption," Journal of Interdisciplinary Economics, , vol. 31(2), pages 183-216, July.
    13. Colin O'Reilly, 2021. "Violent conflict and institutional change," Economics of Transition and Institutional Change, John Wiley & Sons, vol. 29(2), pages 257-317, April.
    14. Le, Thai-Ha & Bui, Manh-Tien & Uddin, Gazi Salah, 2022. "Economic and social impacts of conflict: A cross-country analysis," Economic Modelling, Elsevier, vol. 115(C).
    15. Graw, Valerie & Husmann, Christine Ladenburger, 2012. "Mapping Marginality Hotspots – Geographical Targeting for Poverty Reduction," Working Papers 147917, University of Bonn, Center for Development Research (ZEF).
    16. Chuah, Swee Hoon & Feeny, Simon & Hoffmann, Robert & Sanjaya, Muhammad Ryan, 2019. "Conflict, ethnicity and gender: A money-burning field experiment in Indonesia," Economics Letters, Elsevier, vol. 177(C), pages 14-17.
    17. Ronald Umali Mendoza & Charles Siriban & Tea Jalin Ty, 2019. "Survey Of Economic Implications Of Maritime And Territorial Disputes," Journal of Economic Surveys, Wiley Blackwell, vol. 33(3), pages 1028-1049, July.
    18. Bardwell Harrison & Iqbal Mohib, 2021. "The Economic Impact of Terrorism from 2000 to 2018," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 27(2), pages 227-261, May.
    19. Rasmane Ouedraogo & Montfort Mlachila & Windemanegda Sandrine Sourouema & Ali Compaoré, 2022. "The impact of conflict and political instability on banking crises in developing countries," The World Economy, Wiley Blackwell, vol. 45(6), pages 1937-1977, June.
    20. Rabeh Morrar & Faïz Gallouj, 2016. "The growth of the service sector in Palestine: the productivity challenge," Journal of Innovation Economics, De Boeck Université, vol. 0(1), pages 179-204.
    21. Carolyn Chisadza & Manoel Bittencourt, 2016. "Globalisation and Conflict: Evidence from Sub-Saharan Africa," Working Papers 201640, University of Pretoria, Department of Economics.
    22. Rabia Haroon & Zainab Jehan, 2022. "Measuring the impact of violence on macroeconomic instability: evidence from developing countries," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(1), pages 3-30, January.

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    Keywords

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    JEL classification:

    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • P47 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Performance and Prospects
    • P52 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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