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

Author

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  • 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 for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4762
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    References listed on IDEAS

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    1. World Bank, 2004. "World Development Indicators 2004," World Bank Publications, The World Bank, number 13890.
    2. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, number 5474.
    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, The World Bank, number 13938.
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    Cited by:

    1. 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.
    2. repec:col:000411:016076 is not listed on IDEAS

    More about this item

    Keywords

    war; economic growth; conflict;

    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 - Economic Systems - - Other Economic Systems - - - Performance and Prospects
    • P52 - Economic Systems - - Comparative Economic Systems - - - Comparative Studies of Particular Economies

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