The economic consequences of war: Estimates using synthetic controls

By Maxim Chupilkin and Zsoka Koczan

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A new EBRD Working Paper (number 271)

This paper investigates the short- and long run economic effects of wars drawing on a novel database of almost 400 wars over the past two centuries. We use a synthetic control method to examine both immediate disruptions due to wars and any long term scarring. We find that GDP per capita drops are driven by wars on territory, with GDP per capita even increasing relative to that of comparators for some wars off territory. Wars on territory result in a GDP per capita loss of over 7 percentage points relative to a synthetic control the year after the war ends. Civil wars have more persistent effects than interstate wars. Furthermore, our results suggest that a focus on flows, such as changes in value added generated each year, may significantly understate the lasting damage from wars. Even where income per capita recovers, there are lasting scars to labour forces and capital stocks.
 
In order to facilitate further research, the paper is accompanied by an interactive online annex providing economic variables and various counter-factual paths for over 100 wars included in our dataset.
 

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Online Annex

 

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