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Economic consequences of war: Evidence from Sri Lanka |
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| Institution: | 1. Department of Economics “Marco Biagi”, Viale Berengario 51, 41121 Modena, Italy;2. Department of Economics “Marco Biagi” and ReCent, Viale Berengario 51, 41121 Modena, Italy;1. International University, Vietnam National University, Ho Chi Minh City, Vietnam;2. Glasgow School of Business & Society, Glasgow Caledonian University, UK;1. Department of Economics and Finance, Dept. 3985, 1000 E. University Ave., Laramie, WY 82071, USA;2. Department of Economics, Bates College, Pettengill Hall, Room 273, Lewiston, ME 04240, USA |
| Abstract: | We propose a theoretical and econometric framework to evaluate the impact of war on economic growth of a developing country with an open economy. The theoretical framework encompasses both the neoclassical and endogenous growth models. We test this framework using Sri Lankan data. The war had significant and negative effects both in the short and long-run (annual average of 9% of GDP). High returns from investment in physical capital did not translate in sizable positive externalities. Only short-run significant effects of openness on growth are found. Inconsistent politically driven policies towards openness are the likely reason. |
| Keywords: | Conflict Growth Returns to investment |
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