Challenges to economic growth in post-conflict enviroments : new trends in human capital loss, aid effectiviness, and trade liberalization

Abstract

The UNDP estimates that 526,000 people die each year as a result of violent conflict, making conflict deterrence a top priority for the international community. Immediately following a major conflict, countries that stagnate in economic growth have a 40% risk of conflict recurrence, yet those who successfully maintain high economic growth see their risk reduced to 25%. Due to this, stimulating growth should be a top priority in any economic reconstruction model. This paper aims to measure the effectiveness and efficiency of selected stimulants of economic growth: foreign direct investment, trade and financial liberalization, developmental assistance, and humanitarian aid. The subsequent macroeconomic responses are evaluated throughout the sample of 30 conflicts terminated between 1989 and 2014. This paper also explores the social and economic impacts of conflict and violence and develops a new indicator, the Human Capital Loss index, to quantify conflict intensity levels within the sample. Post-conflict countries require strong surges of investment, aid, and debt relief immediately following war, and those in the low income country (LIC) grouping require substantially greater efforts on the part of the international community to sustain growth.