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Breaking the Curse of Sisyphus: An Empirical Analysis of Post-Conflict Economic Transitions

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Abstract

This paper provides an empirical analysis of the principal determinants of post-conflict economic transitions during the period 1960–2010 using a dynamic panel estimation approach. In addition to demographic, economic, geographic, and institutional variables, we introduce a novel measure of conflict recurrence risk, estimated with a logistic regression approach controlling for unobserved fixed effects in a non-linear probability model. The empirical results show that the risk of conflict recurrence is a significant determinant of post-conflict economic performance, even after controlling for a broad set of demographic, economic, geographic, and institutional factors.

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Notes

  1. This database is a joint project of the Uppsala Conflict Data Program (UCDP) at the Department of Peace and Conflict Research, Uppsala University and the Center for the Study of Civil War at the International Peace Research Institute in Oslo (PRIO).

  2. Humphreys (2005) and Blattman and Miguel (2010) provide extensive reviews of the literature on the causes and consequences of civil conflicts.

  3. There is a vast and growing literature on early warning indicators and prediction methods, led by, among others, Eichengreen et al. (1995) and Frankel and Rose (1996) on forecasting currency crises and Estrella and Mishkin (1998) on predicting economic recessions.

  4. Without loss of generality, the threshold can be 0.

  5. While the ‘had conflict’ variable may arguably capture country characteristics, there is no test available to address this question directly. It is also worth noting that country fixed effects are modeled separately in our estimation, based on the logit random-effect framework. Also, including a range of other explanatory variables shows that the marginal impact of having a conflict before never drops below 25%.

  6. We test other measures of human capital such as primary, tertiary, and total school enrollment rates, which show the same pattern, but are statistically insignificant. In our view, this is because conflict has a greater effect on secondary school enrollment, causing a higher degree of volatility compared with other variables.

  7. Additional regressions show that hydrocarbon production is not significant for the occurrence of civil conflict. We also consider two other time dummies for the discovery of hydrocarbon reserves and the start of production, which are insignificant when the ‘had conflict’ variable is included in the regression.

  8. These simple averages, not weighted by population or GDP, better highlight the global level of conflict recurrence risk. First, as the GDP and population have a direct effect on conflict risk, averaging according to these weights can lead to biased results. Second, the sample of countries is changing over time in both panels.

  9. An important feature of this result is that we use an abstract measurement of risk in our calculation (the first column of Table 1). If we include other variables, the impact of the risk of conflict recurrence would be larger.

  10. This conclusion should be treated with caution, because the direction of causality is unclear as weak institutions may also contribute to conflict duration and to slower growth afterwards. In this paper, while we do not explicitly deal with this issue, we reason that the impact of institutional factors beyond what is incorporated in our growth model is captured by fixed effects and therefore should not distort the key empirical findings.

  11. An important problem with the analysis of aid effectiveness is identification when all types of aid are bundled together. For example, humanitarian or military aid should not be expected to have the same effect on economic growth as aid adding to a country’s productive capacity. Lacking disaggregated data on foreign aid, this study, too, relies on total foreign aid as measured by the OECD Development Assistance Committee.

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Acknowledgements

The authors would like to thank Josef Brada, Carlos Caceres, Paul Cashin, Victor Davies, Selim Elekdag, Samiei Hossein, Padamja Khandelwal, Tidiane Kinda, Zijun Luo, Lawrence McDonough, Kia Penso, Katerina Teksoz, Fatih Yilmaz, and two anonymous referees for their insightful comments and suggestions. The views expressed herein are those of the authors and should not be attributed to the IMF, its executive Board, or its management.

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Cevik, S., Rahmati, M. Breaking the Curse of Sisyphus: An Empirical Analysis of Post-Conflict Economic Transitions. Comp Econ Stud 57, 569–597 (2015). https://doi.org/10.1057/ces.2015.20

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