The Global Economic Burden of Violent Conflict

Calculating the economic impact of different global challenges such as climate change or disease helps uncover the scale, distribution and structure of their economic burdens. Likewise, violent conflict affects billions of people worldwide, whether directly or indirectly. While the mechanisms for these effects have been widely studied on a case study basis, we set out to test some of the stylized facts relating to conflict effects on a cross-country basis. After suggesting a method for costs estimation that accounts for multiple forms of conflict, we disaggregate our results both by time and region. We find that in the absence of violent conflict since 1960, the level of global GDP in 2014 would have been around 33% higher. When disaggregating these costs by conflict type, civil conflicts are estimated to be by far the costliest. We observe a significant influence on growth up to four years following the end of conflict, although the direction of this effect depends on the intensity of conflict. On the other hand, neighbours suffer almost as much as host countries during conflict, thus showing the importance of mitigating spillovers rapidly. Finally, we find the largest absolute costs to be associated with violent conflict in China and India, while Sri Lanka suffers the largest relative burden (as a percentage of GDP). In contrast, many developed economies actually benefit from participating in conflict on foreign soil.