Conflicts and Returns to Stability in Developing Countries: A Comparative Analysis

30 Pages Posted: 20 Apr 2016

Date Written: September 1, 2010

Abstract

Sub-Saharan Africa's dismal development outcomes -- growth collapse and declining real income -- are often used to highlight its sharp development contrast with other regions of the developing world. Drawing on a large cross-section analysis, this paper shows that Africa's underlying dismal records can also be largely accounted for by the skewed distribution of growth in the post-independence era. In particular, structurally low investment rates in a context of high political risk and uncertainty undermined growth prospects in the region. However, counterfactual simulations based on a variation of neoclassical growth models and under the hypothetical equalization of political risk profile alternative result in large economic returns, reflected in the significantly higher level of aggregate output and income in the subset of conflict-affected countries. Income gets even higher when the hypothetical reduction of political risks alternative is accompanied by sustained increases in capital accumulation.

Keywords: Economic Theory & Research, Post Conflict Reconstruction, Achieving Shared Growth, Emerging Markets, Debt Markets

Suggested Citation

Fofack, Hippolyte, Conflicts and Returns to Stability in Developing Countries: A Comparative Analysis (September 1, 2010). World Bank Policy Research Working Paper No. 5428. Available at SSRN: https://ssrn.com/abstract=1680136

Hippolyte Fofack (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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