Civil War Destruction and the Prospects for Economic Growth

This article examines the effects of civil wars on economies. The “war renewal” school of thought maintains that wars can produce beneficial effects as they improve efficiency in the economy, especially by reducing the power of special interests, bring technological innovation, and advance human capital. The “war ruin” school of thought sees mostly detrimental effects resulting from war. We seek to address two critical questions. First, which perspective on wars and economic growth is more accurate? Second, to what extent do policy choices at both the domestic and international levels exert influence on economic growth? We develop several hypotheses to assess these arguments, and utilizing a 2SLS model, test them on data for all nations for the period 1960–2002. We find that generally wars exercise negative economic effects and that economic fundamentals, as well as the response by the international community to civil wars, exert powerful effects on economic growth.