Can War Foster Institutional Change?

Abstract

Exposure to violent conflict increases prosocial behavior, which is a form of social capital or informal institutions. This article studies whether these changes to informal institutions map into change to formal institutions, and if this mapping is characterized by substitutability or complementarity between institutions. To test this hypothesis, we use the synthetic control method to construct a counterfactual path of formal institutions in Sierra Leone and Burundi during and after violent conflict. Results indicate that violence and the corresponding change to informal institutions leads to a persistent decline in the quality of the formal legal system and protections of private property. We interpret this as evidence of substitutability between informal and formal institutions.

Keywords: Institutional Change, Violent Conflict, Social Capital, Sierra Leone, Burundi

JEL Classification: D74, O17, P48, P50