Conflict, Economic Growth and Spillover Effects in Africa

While there is a large empirical literature on the determinants of conflict, much less attention has been given to its economic effects and even less to the spillover effects it can have on neighbours. This paper considers the economic effects of conflict for a panel of African countries and develops an approach to calculating the spillovers that moves beyond simply using geographical distance measures and incorporates economic and political differences. The initial empirical results suggest that conflict has a strong negative spillover effect on directly contiguous countries’ growth, but no significant impacts were observed on non-contiguous countries. When economic and political factors are considered, this result remains, but the spillover effect is smaller. This implies that it is important to take such factors into account. While the impact of conflict remains devastating, studies that use only geographical distance measures may have been overestimating the impact on neighbours.