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The Effects of Conflict on the Structure of the Economy

Published on: December 2009​
Author:
Genre: Economics/Finance​ Category: Research Report/ Research Paper/ White Paper​
This paper studies the impact of civil conflict on the structure of the economy. Conflict reduces the share of the manufacturing sector in the GDP, increases the exploitation of some simple natural resources (i.e. forestry) and reduces the production of crops. Using industrial level data for developing countries we study the channels through which conflict affects the manufacturing sector. As expected, we find that industries that are more institutional/transaction intensive are the ones that suffer most in conflictive societies. Labour-intensive sectors are also negatively affected by conflict. It is also found that exporting industries and sectors requiring external financing suffer more during conflict. Our results are robust to sensitivity analysis and have implications for post conflict policies.

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