Abstract
Economic growth theory highlights the importance of saving rates to explain the long-run economic performance of economies. While economic theory has provided an analytical and empirical framework to understand the determinants of saving rates, one of the limitations is that it excludes from the analysis the potential effects of armed conflict and political instability, although it has been demonstrated that such situations can affect intertemporal preferences in terms of consumption and saving. Using a sample of 55 countries with/without conflict from 1980 to 2015, we analyze whether aggregate savings rates are negatively correlated with the existence, intensity, and duration of an armed conflict. The results indicate that countries that have suffered some type of conflict exhibit a saving rate 2.7% lower on average than the rate exhibited by countries that have not suffered such conflict. Additionally, if there is a high-intensity conflict, the saving rates decreases 2.5% more relative to countries that experience low-intensity conflict. Finally, we found a nonlinear relationship between saving rates and conflict duration, suggesting that the impact of conflict on savings decreases with time. These results extend the literature on the effects of armed conflicts on the long-run economic growth.
References
Becker, G. S., & Mulligan, C. B. (1997). The endogenous determination of time preference. The Quarterly Journal of Economics, 112(3), 729–758.10.1162/003355397555334Search in Google Scholar
Blattman, C., & Miguel, E. (2010). Civil war. Journal of Economic literature, 48(1), 3–57.10.3386/w14801Search in Google Scholar
Böhm-Bawerk, E. V.(1891).The positive theory of capital. London: Macmillan.Search in Google Scholar
Callen, M., Isaqzadeh, M., Long, J. D., & Sprenger, C. (2014). Violence and risk preference: Experimental evidence from Afghanistan. American Economic Review, 104(1), 123–148.10.1257/aer.104.1.123Search in Google Scholar
Carlin, W., & Mayer, C. (2003). Finance, investment, and growth. Journal of financial Economics, 69(1), 191–226.10.1016/S0304-405X(03)00112-0Search in Google Scholar
Collier, P. (1999). On the economic consequences of civil war. Oxford economic papers, 51(1), 168–183.10.1093/oep/51.1.168Search in Google Scholar
Fisher, I. (1930). Theory of interest: as determined by impatience to spend income and opportunity to invest it. Augustusm Kelly Publishers, Clifton.Search in Google Scholar
Friedman, M. (1957). A theory of the consumption function, 20–37. New Jersey: Princeton University Press.10.1515/9780691188485-005Search in Google Scholar
Gleditsch, N. P., Wallensteen, P., Eriksson, M., Sollenberg, M., & Strand, H. (2002). Armed conflict 1946–2001: A new dataset. Journal of Peace Research, 39(5). Also see PRIO’s webpage10.1177/0022343302039005007Search in Google Scholar
Grigoli, F., Herman, A., & Schmidt-Hebbel, K. (2018). Saving in the world. World Development, 104, 257–270.10.1016/j.worlddev.2017.11.022Search in Google Scholar
Hoffer, A. J. (2015). Choice Under the Shadow of Conflict: An Experimental Investigation. Available at SSRN: https://ssrn.com/abstract=2607687.Search in Google Scholar
Kim, Y. I., & Lee, J. (2014). The long-run impact of a traumatic experience on risk aversion. Journal of Economic Behavior & Organization, 108, 174–186.10.1016/j.jebo.2014.09.009Search in Google Scholar
Pedersen, D. (2002). Political violence, ethnic conflict, and contemporary wars: broad implications for health and social well-being. Social science & medicine, 55(2), 175–190.10.1016/S0277-9536(01)00261-1Search in Google Scholar
Pettersson, T., & Eck, K. (2018). Organized violence, 1989–2017. Journal of Peace Research, 55(4), 535–547.10.1177/0022343318784101Search in Google Scholar
Samuelson, P. A. (1937). A note on measurement of utility. The Review of Economic Studies, 4(2), 155–161.10.2307/2967612Search in Google Scholar
Schmidt-Hebbel, K., Serven, L., & Solimano, A. (1996). Saving and investment: paradigms, puzzles, policies. The World Bank Research Observer, 11(1), 87–117.10.1093/wbro/11.1.87Search in Google Scholar
Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65–94.10.2307/1884513Search in Google Scholar
Thimann, M. C., & Dayal-Gulati, M. A. (1997). Saving in Southeast Asia and Latin America compared: searching for policy lessons (No. 97–110). International Monetary Fund, Working Paper Series.10.5089/9781451853308.001Search in Google Scholar
Venieris, Y. P., & Gupta, D. K. (1986). Income distribution and sociopolitical instability as determinants of savings: a cross-sectional model. Journal of Political Economy, 94(4), 873–883.10.1086/261412Search in Google Scholar
Voors, M. J., Nillesen, E. E., Verwimp, P., Bulte, E. H., Lensink, R., & Van Soest, D. P. (2012). Violent conflict and behavior: a field experiment in Burundi. American Economic Review, 102(2), 941–964.10.1257/aer.102.2.941Search in Google Scholar
© 2019 Walter de Gruyter GmbH, Berlin/Boston
Articles in the same Issue
- Research Articles
- The Mortality Cost Metric for the Costs of War
- The Elusive Determinants of Civil Wars
- Is Divorce a Solution? Decentralization Effect on Economic Growth in Post-Civil Conflict Countries
- The Effect of Armed Conflict on Savings Rates: International Evidence from 1980 to 2015
- Transforming Regions of Conflict through Trade Preferential Agreements: Israel, Jordan and the QIZ Initiative
Articles in the same Issue
- Research Articles
- The Mortality Cost Metric for the Costs of War
- The Elusive Determinants of Civil Wars
- Is Divorce a Solution? Decentralization Effect on Economic Growth in Post-Civil Conflict Countries
- The Effect of Armed Conflict on Savings Rates: International Evidence from 1980 to 2015
- Transforming Regions of Conflict through Trade Preferential Agreements: Israel, Jordan and the QIZ Initiative