Political Violence and Economic Growth

This paper analyzes the economic growth impact of organized political violence. First, the authors articulate the theoretical underpinnings of the growth impact of political violence in a popular model of growth under uncertainty. The authors show...

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Bibliographic Details
Main Authors:	Bodea, Cristina, Elbadawi, Ibrahim A.
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ADULT MORTALITY ARMED CONFLICT BATTLE BULLETIN CASUALTIES CIVIL PEACE CIVIL SOCIETY CIVIL SOCIETY ORGANIZATIONS CIVIL WAR CIVIL WARS CONFLICT CONFLICT ECONOMIES CONFLICT MANAGEMENT CONFLICT RESOLUTION CONFLICTS COST OF WAR COSTS OF CONFLICT COSTS OF WAR CULTURAL CHANGE DEATHS DEMOCRACY DEMOCRATIC INSTITUTIONS DEMOGRAPHIC FACTORS DEPENDENCE DETERMINANTS OF GROWTH DEVELOPING COUNTRIES DEVELOPMENT POLICY DEVELOPMENT STRATEGIES DOMESTIC VIOLENCE DURATION OF CONFLICT ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC POLICIES ECONOMIC RELATIONS ELECTIONS ETHNIC DIVERSITY ETHNIC DIVISIONS ETHNIC DOMINANCE ETHNIC FRACTIONALIZATION ETHNICALLY DIVERSE SOCIETIES EXTERNAL DEBT EXTERNAL SHOCKS EXTORTION FIGHTING FIRE FOREIGN AID FOREIGN INVESTMENT FOREIGN INVESTORS FOREIGN POLICY FRONTIER GENDER GAP GRAVE GROWTH COLLAPSES GROWTH MODEL GROWTH MODELS HEALTH IMPACT HIGH RISK HUMAN BEINGS HUMAN CAPITAL HUMAN LIFE HUMAN SECURITY IMF IMPACT ON HEALTH INCOME DISTRIBUTION INCOME PER CAPITA INTERNAL CONFLICTS INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL SECURITY INTERNATIONAL STUDIES JOURNAL OF CONFLICT RESOLUTION LABOR MARKET LAW ENFORCEMENT LIFE EXPECTANCY LOW-INCOME COUNTRIES MALARIA MEETING MIDDLE EAST MILITARY ACTIVITIES MILITARY EXPENDITURE MORTALITY MORTALITY RATE NATIONS NATURAL RESOURCES NEUTRALITY NORTH AFRICA PEACE PEACE RESEARCH POLARIZATION POLICES POLICY RESEARCH POLICY RESEARCH WORKING PAPER POLITICAL CHANGE POLITICAL INSTABILITY POLITICAL PARTICIPATION POLITICAL POWER POLITICAL SYSTEMS POLITICAL VIOLENCE POST CONFLICT POST-CONFLICT PROBABILITY OF WAR PROGRESS PROPERTY RIGHTS PUBLIC HEALTH PUBLIC POLICY QUALITY OF SERVICES RATE OF GROWTH RATES OF GROWTH RECONSTRUCTION RELIGIOUS DIVISION RELIGIOUS FRACTIONALIZATION RESPECT RIOT RIOTS RISK OF WAR RISKY BEHAVIOR RULE OF LAW SANCTIONS SAVINGS SECONDARY SCHOOL SERVICE DELIVERY SOCIAL CLASS SOCIAL COHESION SOCIAL CONFLICT SOCIAL CONSEQUENCES SOCIAL DIVERSITY SOCIAL FRACTIONALIZATION STARVATION STATE UNIVERSITY SUB-SAHARAN AFRICA TERRORISM TERRORIST UNDERDEVELOPMENT VIOLENT CONFLICT VIOLENT MEANS WAR DURATION WARFARE
Online Access:	http://documents.worldbank.org/curated/en/2008/08/9766080/political-violence-economic-growth http://hdl.handle.net/10986/6805

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Summary:	This paper analyzes the economic growth impact of organized political violence. First, the authors articulate the theoretical underpinnings of the growth impact of political violence in a popular model of growth under uncertainty. The authors show that, under plausible assumptions regarding attitudes toward risk, the overall effects of organized political violence are likely to be much higher than its direct capital destruction impact. Second, using a quantitative model of violence that distinguishes between three levels of political violence (riots, coups, and civil war), the authors use predicted probabilities of aggregate violence and its three manifestations to identify their growth effects in an encompassing growth model. Panel regressions suggest that organized political violence, especially civil war, significantly lowers long-term economic growth. Moreover, unlike most previous studies, the authors also find ethnic fractionalization to have a negative and direct effect on growth, though its effect is substantially ameliorated by the institutions specific to a non-factional partial democracy. Third, the results show that Sub-Saharan Africa has been disproportionately impacted by civil war, which explains a substantial share of its economic decline, including the widening income gap relative to East Asia. Civil wars have also been costly for Sub-Saharan Africa. For the case of Sudan, a typical large African country experiencing a long-duration conflict, the cost of war amounts to $46 billion (in 2000 fixed prices), which is roughly double the country's current stock of external debt. Fourth, the authors suggest that to break free from its conflict-underdevelopment trap, Africa needs to better manage its ethnic diversity. The way to do this would be to develop inclusive, non-factional democracy. A democratic but factional polity would not work, and would be only marginally better than an authoritarian regime.

Political Violence and Economic Growth

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