The Impact of Armed Conflict on Firms' Performance and Perceptions
European Bank for Reconstruction and Development Working Paper 152
49 Pages Posted: 15 Dec 2012
Date Written: December 14, 2012
This study is the first to explore the short-run impact of armed conflict on firms’ performance and their perceptions of the business environment. We focus on the August 2008 conflict between Georgia and Russia and use the Business Environment and Enterprise Performance Survey data before and after this armed conflict. We can exploit the variation in armed conflict exposure to identify these relationships. The difference-in-differences estimates suggest that despite the short duration, armed conflict had a significant and negative impact on exports, sales and employment for at least a subset of firms. Perceptions of a few business environment obstacles were also affected, but not necessarily negatively. The results suggest that young firms experienced a scarring effect, which could lead them to close down prematurely. Longer-term impacts of the conflict on firms’ performance and local economic development can therefore not be ruled out.
Keywords: armed conflict, Georgia, business climate, firm performance
JEL Classification: D74, O17, O43, R30
Suggested Citation: Suggested Citation