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The Economic Costs of Conflict: A Production Network Approach

Author

Listed:
  • Mathieu Couttenier

    (CERGIC - Center for Economic Research on Governance, Inequality and Conflict - ENS de Lyon - École normale supérieure de Lyon)

  • Nathalie Monnet

    (Center for Primary Care and Public Health - UNIL - Université de Lausanne = University of Lausanne)

  • Lavinia Piemontese

    (Bocconi University [Milan, Italy])

Abstract

We develop a novel approach for estimating the economic costs of conflict, using the production network as the primary mechanism through which the disruptive effects of localized conflict spread to peaceful areas. Applying this approach to the Maoist insurgency in Eastern India from 2000 to 2009, we quantify the overall impact of conflict, taking network propagation into account. Our key finding reveals that a one percentage point increase in conflict-induced distortion is associated with an average annual decrease of 0.236% in aggregate output. Notably, 73% of the total output loss can be attributed to network propagation.

Suggested Citation

  • Mathieu Couttenier & Nathalie Monnet & Lavinia Piemontese, 2024. "The Economic Costs of Conflict: A Production Network Approach," Working Papers hal-04621803, HAL.
    • Handle: RePEc:hal:wpaper:hal-04621803
    Note: View the original document on HAL open archive server: https://hal.science/hal-04621803
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    Keywords

    Conflict; Firms; Production Network; Aggregate Output Loss Conflict;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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