The price of war: A cross-country analysis on the conflict-growth nexus

With the growth in conflict around the world, the measurement of the likely economic cost of conflict is an important task in making the case for peacekeeping, peacemaking and post conflict reconstruction to prevent recurrence. Conflict is also a development issue, as most of the conflicts affect the poorest countries and are often civil wars. This paper deals with a number of issues that arise in the literature and presents a comprehensive analysis of the relationship between conflict and economic growth in the present geopolitical environment. Utilizing an extensive cross-country panel dataset and a structural growth model incorporating conflict dynamics, it offers robust estimates of the effects of conflict. It finds that they are higher for low-income countries with direct and spillover effects larger for Asia. It also showed that the spillover effects of conflict do not affect the overall damage on the GDP loss and this result does not change in the post-Cold War period. • Analyse the direct and spillover effects of conflict on economic growth using a large cross-country sample and various econometric techniques. • Examine how conflict negatively affects economic output in the short and long run. • Heterogeneity in the conflict-growth relationship may be driven by reverse causality. • Find that the negative impact of conflict is particularly severe in Asian countries.