Economics Letters 106 (2010) 200–204

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Economics Letters
j o u r n a l h o m e p a g e : w w w. e l s ev i e r. c o m / l o c a t e / e c o l e t

Violent conflict and economic growth: Some time-series evidence

Martha A. Starr ⁎
Department of Economics, American University, 4400 Massachusetts Ave. NW, Washington, DC 20016, United States

a r t i c l e i n f o a b s t r a c t

Article history: This paper uses time-series methods to examine interrelationships between growth and violent conflict in
Received 16 September 2007 Sub-Saharan Africa. Results show bidirectional causalities, but the key determinant of conflict risk is prior
Received in revised form 25 November 2009 conflict experience, not fluctuations in economic growth.
Accepted 2 December 2009
© 2009 Elsevier B.V. All rights reserved.
Available online 31 December 2009

Keywords:
Conflict
Growth
Sub-Saharan Africa
Structural VAR

JEL classification:
D74
E2
O11
O55

1. Introduction
The 1980s and 1990s saw a substantial increase in the number of
violent conflicts around the globe, related to the break-up of the
former Yugoslavia, the disintegration of the Soviet Union, and
outbreaks of civil wars across Sub-Saharan Africa. In an influential
paper, Collier and Hoeffler (2004) argued that poor economic growth
plays a causal role in giving rise to and sustaining violent civil
conflicts, because low or declining incomes reduce the opportunity
costs associated with rebelling against governments against which
people hold grievances. Econometrically, it is not necessarily easy to
establish how growth and conflict are related. A likelihood of two-way
causality is widely recognized: low growth may raise conflict risks,
but escalation of conflict may itself lower growth. Thus, if a regression
is run in which conflict risk is a function of contemporaneous or
lagged growth, estimated effects of growth on conflict will be biased if
there are unobserved factors which both increased conflict risks and
depressed growth. Determining how exogenous changes in growth
affect conflict risk is important for gauging the potential of growth-
promoting policies to attenuate conflict risks.
This paper reinvestigates this question, using time-series methods
and panel data on 44+ countries of Sub-Saharan Africa over the
1960–2005 period. Time-series methods have been widely used in
⁎ Tel.: +1 202 885 3747.
E-mail address: mstarr@american.edu.
quantitative studies of violent conflicts (see, e.g. Enders and Sandler,
2000, 2002), although they have not much been used specifically to
investigate how growth and conflict relate. An important exception is
the study by Blomberg, Hess and Orphanides (2004) which has a
different focus from the present paper, but implements a model quite
similar to ours. The advantage of using time-series methods is that,
rather than estimating one equation of a two-equation system as
previous work has done, vector auto-regression expressly allows us to
account for the possibility of two-way causalities between growth and
conflict, and to quantify the relative importance each plays in the
other's variance. In brief, we indeed find evidence that growth shocks
raise conflict risks and that conflict shocks lower growth — but the
role of one in explaining the other is extremely small. Rather, present
conflict risks are strongly driven by prior conflict experience: once a
conflict breaks out, it takes a long time for the risk of further conflict to
trail down.
2. Data and specification
To conceptualize the relationship between conflict and growth, we
specify a bivariate panel vector auto-regression as follows:
L
Conflictit = βc + βgc0 Growthit + ∑ βccs Conflictit−s ð1Þ
s=1
L
+ ∑ βgcs Growthit−s + εcit
s=1

0165-1765/$ – see front matter © 2009 Elsevier B.V. All rights reserved.
doi:10.1016/j.econlet.2009.12.001
 M.A. Starr / Economics Letters 106 (2010) 200–204
L
Growthit = βg + βcg0 Conflictit + ∑ βcgs Conflictit−s ð2Þ
s=1
L
+ ∑ βggs Growthit−s + εgit
s=1
Eqs. (1) and (2) have the following reduced-form representation:
L L
Conflictit = πc + ∑ πccs Conflictit−s + ∑ πgcs Growthit−s + μ cit
s=1 s=1
ð3Þ
L L
Growthit = πg + ∑ πcgs Conflictit−s + ∑ πggs Growthit−s + μ git
s=1 s=1
ð4Þ
where μ jit = πcj εcit + πgj εgit for j = c,g. Our primary interest is in
estimating the effect of underlying shocks to growth, ε git, on the risk
of violent conflict, as this will tell us the extent to which exogenous
improvements in growth are conflict-attenuating. This effect cannot
be directly recovered from the reduced-form system because its
innovations reflect both types of shocks. To overcome this problem,
we impose the additional restriction that the coefficient βgc0 in the
structural equation is equal to zero. This assumption, which is also
used by Blomberg, Hess and Orphanides (2004), is motivated by the
intuition that a year of unexpectedly poor growth is unlikely to cause
conflict to escalate within that year, because of the time it would take
discontented people to join with rebel groups and begin fighting.
However, βcg0 is allowed to be non-zero, consistent with the
observation that outbreaks of conflict often depress growth concur-
rently, due to disruptions in production and trade and reductions in
investment.1
It is well-known that results of quantitative studies of conflict tend
to be sensitive to changes in variable definitions, data sources, and
sample composition.2 To address this potential problem, we use two
sources of data on growth in real GDP per capita and two definitions of
conflict. Data on growth in GDP per capita are taken from: (1) the
Penn World Tables (Version 6.2), in which values are expressed in
constant U.S. dollars adjusted for purchasing power parity, and (2) the
World Bank's World Development Indicators (WDI), specifically the
series in which values are expressed in constant local currency terms.3
The Penn World Tables cover 44 countries and run from 1960 to 2004,
while the WDI data cover 47 countries and run from 1960 to 2005,
although not all countries have data for all years.4 The data on conflict
are taken from the Armed Conflicts Data Set (version 2007-4) of the
International Peace Research Institute of Oslo and the University of
Uppsala (PRIO/Uppsala), which permit two definitions of conflict. In
the first, a country is considered to be in “civil conflict” if it is classified
by PRIO as experiencing “a contested incompatibility which concerns
government and/or territory where the use of armed force between
two parties, of which at least one is the government of a state, results
in at least 25 battle-related deaths”. In the second, a country is
considered to be in “civil war” if it is experiencing a conflict of this
1 5
Although the opposite assumption is far less compelling on a priori grounds, it was
also used for structural factorization as a robustness check. The strong persistence of
the conflict process is also quite clear in these results, though other results differ. Here
growth is quite strongly driven by conflict shocks (with the latter accounting for 90%
or more of the former's forecast error at a 10-year horizon), and a positive shock to
growth actually raises conflict risks by 1–2 percentage points. While one can conceive
of reasons for these results, weight should not be placed on them, given the low
plausibility of the identifying assumption.
2
See Fearon (2005) and Hegre and Sambanis (2006).
3
Both data sets were accessed online on Sept 10, 2007. Note also that the PWT data
are chain-weighted while the WDI data use fixed weights.
4
In the PWT the average number of years of data per country is 40.4; for the WDI it
is 37.6. The three countries for which the PWT does not have data but the WDI does
are Angola, the Seychelles, and Sudan.
201
kind with at least 1000 battle-related deaths per year. In the vector
auto-regressions, the conflict variables are entered as zero-one, so
that the conflict equation is effectively a linear probability model.5 In
implementing the model, lag lengths were chosen using the Akaike
criteria, which in all four cases indicated an optimal lag length of five
years.6
Results are presented as impulse response functions in Figs. 1
and 2, which correspond to the first and second definitions of conflict
respectively.7 The graphs show the estimated effects of one standard-
deviation shocks to conflict and growth; the dotted lines represent
95% confidence intervals. As is clear from the figures, results are to a
large degree robust across the four specifications. All specifications
suggest that a shock to growth would lower conflict risk, although
generally in a modest and short-lived way: a one standard-deviation
shock to the growth rate is estimated to lower conflict risk by 1–2
percentage points for a year or two, but thereafter effects taper off.
Also, results are of borderline significance in specifications using the
WDI data. In contrast, in all specifications a conflict shock pulls the
growth rate down by about 1 percentage point concurrently and
continues to depress growth for the next 3 years. Thus, we indeed find
evidence of two-way causality, although the effect of conflict shocks
on growth is more perceptible than that for growth shocks on conflict.
An important result in all four specifications concerns the time
profile of the effect of a conflict shock on conflict risk. As the impulse
responses show, after a conflict shock occurs, it takes a long time for
conflict risk to return to its pre-shock level: in a country that
experienced a conflict shock 10 years ago, the conflict risk remains 5–
6 percentage points above where it would have been had the shock
not occurred, and the effect is uniformly statistically significant.8 This
time profile is strikingly similar to that found by Blomberg, Hess, and
Orphanides (2004), even though their data cover different countries
and years and their SVARs include different variables. That conflict
shocks play the dominant role in explaining variations in conflict risk
is also clear from the variance decompositions; as shown in Table 1,
growth shocks account for negligible shares of the forecast error of the
conflict equations, and while conflict shocks account for slightly larger
shares of the forecast error in the growth equations, their levels too
are very small. Taken together, these results suggest that year-to-year
fluctuations in growth rates play quite a small role in variations in
conflict risks, with the driving force instead being the tendency of
conflicts to persist once they have broken out.
3. Concluding remarks
In sum, the analysis of the present paper establishes that
exogenous variations in growth indeed play a role in explaining
variations in conflict risk in Sub-Saharan Africa, but the magnitude of
the effect is modest. This suggests that, as much as raising growth is
anyway extremely important for Sub-Saharan countries, given the
widespread persistence of absolute poverty, policies that raise growth
over the near term should not be thought of as a ‘silver bullet’ for
turning conflict situations back into peace.
Note that the data show minimal evidence of unit roots. Non-stationarity is
rejected for both GDP series in the tests of Levin, Lin and Chu; Breitung; Im, Pesaran
and Shin; and Hadri. It is also rejected for the two conflict series in all tests, except that
of Levin, Lin and Chu.
6
The models were also run including period dummies for the years 1960–69, 1970–
79, 1980–89, and 2000–2005, which may be important for capturing the continent-
wide deceleration of growth in the 1960s (Deaton, 1999). Including period dummies
has the disadvantage of reducing estimation samples to countries for which growth
data are available for all five decades. Even so, results were qualitatively very similar to
those presented here.
7
For all four models, all characteristic roots lie within the unit circle, indicating that
stability conditions are satisfied.
8
For reference, in 1960–2005, the average probability that a country was experiencing a
conflict in a given year was 16.8% for civil conflicts and 7.4% for civil wars.
 202
M.A. Starr / Economics Letters 106 (2010) 200–204
Fig. 1. Impulse response functions: conflicts defined as 25+ combat deaths.
 M.A. Starr / Economics Letters 106 (2010) 200–204
Fig. 2. Impulse response functions: conflicts defined as 1000+ combat deaths.

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204 M.A. Starr / Economics Letters 106 (2010) 200–204

Table 1 References
Variance decomposition (percent contribution).
Blomberg, S., Hess, G., Orphanides, A., 2004. The macroeconomic consequences of
Share of forecast error Share of forecast error terrorism. Journal of Monetary Economics 51, 1007–1032.
for conflict explained for growth explained Collier, P., Hoeffler, A., 2004. Greed and grievance in civil wars. Oxford Economic Papers
by growth shocks, in by conflict shocks, in 56, 663-595.
specification: specification: Deaton, A., 1999. Commodity prices and growth in Africa. Journal of Economic
Perspectives 13 (3), 23–40.
Forecast horizon (years): 1(a) 1(b) 2(a) 2(b) 1(a) 1(b) 2(a) 2(b) Enders, W., Sandler, T., 2000. Is transnational terrorism becoming more threatening? A
1 0.0 0.0 0.0 0.0 0.6 1.4 0.8 1.3 time-series investigation. Journal of Conflict Resolution 44, 307–332.
2 0.3 0.0 0.0 0.0 1.2 3.2 0.8 1.3 Enders, W., Sandler, T., 2002. Patterns of transnational terrorism, 1970–1999:
alternative time-series estimates. International Studies Quarterly 46, 145–165.
3 0.4 0.0 0.2 0.1 1.3 3.4 1.3 1.7
Fearon, J., 2005. Primary commodity exports and civil war. Journal of Conflict
4 0.4 0.1 0.2 0.1 2.0 3.7 1.6 2.0
Resolution 49, 483–507.
5 0.4 0.1 0.2 0.2 2.1 3.7 1.6 2.0 Hegre, H., Sambanis, N., 2006. Sensitivity analysis of empirical results on civil war onset.
… Journal of Conflict Resolution 50, 508–535.
10 0.4 0.1 0.5 0.3 2.1 3.9 1.7 2.1

Acknowledgments

I am grateful to Robert Blecker, Tom Hertz, Arturo Porzecanski,

Larry Sawers, Frances Stewart, and seminar participants at American
University for valuable comments on earlier versions of this work.