Cost of Conflict and Food

Security in the ESCWA Region

Vito Intini

Section for Emerging and Conflict Related Issues 6 February 2012

• Violent conflicts strengthen the popular conviction that

conflict is a development curse. But exactly how much does

it cost?

• Several studies have tried to provide an answer to this

question, but no consensual answer has emerged. In

particular, point estimates tend to vary considerably across

different studies.

• Moreover, the empirical assessment of the cost of conflict

poses a number of relevant methodological challenges that

are often overlooked in the existing literature.

• Finally, very little is known on the relationship between

conflict, on the one hand, and FS and development, on the

other, in the ESCWA region.

Outline

• Concepts and Stylized Facts

• Methodological Framework

• Transmission Channels

• Measurement of Impact of Conflict

• Conflict-FS Nexus and Challenges

• Recommendations

Concepts & Stylized Facts

• The most cited study in this area is Collier (1999). He finds

that civil war reduces the growth rate of per-capita GDP by

2.2% a year (10-year war would reduce pc GDP by ~25%).

• Collier also shows that after long civil wars the economy

recovers rapidly, whereas after short wars (more intense) it

continues to decline for at least five years.

• Rodrik (1999) argues that outbreaks of social conflict are a

primary reason why national economic growth lacks

persistence.

• Cerra and Saxena (2008) estimate that output declines 6% in

the immediate aftermath of a civil war. However, output

rebounds quickly, recovering half of the fall within a few years.

• Glick and Taylor (2010) find large and persistent impact of

interstate war on trade, national income, and global economic

welfare. The negative effect on trade is strong.

Concepts & Stylized Facts

• The conventional wisdom that interstate war disrupts

economic activity and hence reduces growth does not go

unchallenged.

• An increase in military expenditure might boost aggregate

demand and hence increase income through a multiplier

effect. However, this would likely be a short-term effect,

while in the long-term the growth potential of the economy

should decrease because of crowding-out effect on private

investment.

• A more general argument is that the occurrence of a war

would not alter the long-term trend of per-capita income, but

only cause a transitionary deviation from the steady state.

Methodology Issues

• Most of the existing literature estimates reduced form

models: models where per-capita income (or growth) is

regressed on a measure of conflict duration (or occurrence)

and a set of controls. However, these controls are often

variables that are themselves affected by war. This in turn

causes possible multicollinearity between conflict and the

controls and biases the estimates of the conflict effect.

• Some authors recognise this problem and exclude controls

that are most likely to be affected by conflict (for instance

Collier, 1999). However, if the excluded controls are

significant determinants of development (as measured by

income or any other variable), then an omitted variables

problem arises and estimates of the effect of conflict are

again likely to be biased (i.e. underestimated and/or not

significant).

Methodological Framework

• In our study, a structural model of conflict and development is

estimated for a large sample of countries over a period of >40

years (divided in sub-periods of 5 years each). In this way,

conflict is allowed to affect development both directly and

indirectly via its effect on the controls (institutions, policy,

investment).

• The structural model consists of a set of equations that capture

the effect of conflict on per-capita income and various other

(MDG) variables for ESCWA and other war-torn economies

while separating interstate from intrastate conflicts.

• Equations are estimated by taking into account dynamic effects

as well as endogeneity between conflict and development.

• Source of information on conflicts is the Correlates of War

project (COW): i) conflict duration, ii) number of deaths (more

challenging).

Preliminary General Findings Civil Conflict Interstate Conflict

Av. Duration Av. Deaths Av. Duration Av. Deaths

World 0.27 106 0.07 271

ESCWA 0.39 105 0.13 903

4

5

6

7

8

9

10

11

0 1 2 3 4 5

Years of intrastate war (in a quinquennium)

Pe

r-ca

pit

a G

DP

(lo

g)

-12

-8

-4

0

4

8

12

0 1 2 3 4 5

Years of intrastate war (in a quinquennium)

Ra

te o

f g

row

th o

f p

er-

cap

ita

GD

P

4

5

6

7

8

9

10

11

0 1 2 3 4 5

Years of interstate war (in a quinquennium)

Pe

r-ca

pit

a G

DP

(in

lo

g)

-12

-8

-4

0

4

8

12

0 1 2 3 4 5

Years of interstate war (in a quinquennium)

Ra

te o

f g

row

th o

f p

er-

cap

ita

GD

P

• Most of the negative association between conflict time and growth/income

level is driven by civil conflicts. Interstate conflict duration appears to be

uncorrelated with growth and/or per-capita income level.

• One additional year of civil conflict is directly associated with a decline in

per-capita GDP growth of ~0.6% a year.

• However, we have not yet determined direction of causality.

Effect of Conflict on Institutions

Variable Estimate

Lagged Institution Index Quality 0.79 (0.01)***

Lagged GDP p.c. 0.43 (0.55)

Civil War -0.24 (0.56)

Inter-state War -2.57 (0.89)**

Civil War (ESCWA) -0.80 (0.12)***

Inter-state War (ESCWA) 0.50 (1.14)

ESCWA -0.30 (0.34)

Fuels 0.00 (0.00)

Legor 0.19 (0.31)

Ethnic 0.29 (0.50)

Malaria -0.08 (0.02)***

Constant 3.46 (0.55)***

Observations 503 Points on a scale 1-10. Robust standard errors in parenthesis; ***estimate is significant at 99% , **estimate is

significant at 95%, *estimate is significant at 90%; Endogenous variables: Civil War, Inter-state War, Civil

War (ESCWA), Interstate War (ESCWA), Fuels.

Effect of Conflict on Trade

Variable Estimate

Lagged Trade 0.89 (0.05)***

Civil War -1.51 (0.70)**

Inter-state War 0.96 (0.83)

Civil War (ESCWA) 1.43 (2.93)

Inter-state War (ESCWA) 14.19 (28.00)

ESCWA 4.30 (5.00)

GDP 6.22 (2.52)**

GDP p.c. -6.88 (3.52)*

Landlocked -23.84 (16.62)**

Country Surface -5.12 (1.64)***

Constant 54.78 (22.79)**

Observations 696

Figures in %. Robust standard errors in parenthesis; ***estimate is significant at 99% , **estimate is

significant at (95%), *estimate is significant at 90%; Endogenous variables: Inter-state War, Inter-state War

(ESCWA), GDP, GDP p.c.

Effect of Conflict on Investment Variable Estimate

Lagged Investment 0.53 (0.07)***

Civil War -7.25 (3.55)**

Inter-state War 0.61 (0.41)

Civil War (ESCWA) -2.55 (0.69)***

Inter-state War (ESCWA) -1.13 (7.99)

ESCWA -0.61 (1.04)

Volatility -0.00 (0.00)***

Financial Openness 0.03 (0.24)

M2 -0.08 (0.02)***

Institutions 0.54 (0.60)

Trade 0.42 (0.15)***

Latitude 4.24 (3.33)

Landlocked -1.24 (1.69)

Malaria -0.34 (0.12)***

Constant 7.91 (2.98)***

Observations 551

Figures in %. Endogenous variables: war_intl, war_intl_escwa, war_civil, war_civil_escwa, M2,

Institutions, Trade, Fin_open, Volatility.

Effect of Conflict on MDG Dimensions) HDI Social Immuniz. Life

Expect.

Average

School.

Access

to Sanit.

Child

Mortal.

Inequal.

Civil War -0.00 -0.09*** -1.53* 0.30 -0.01 -0.41 1.32 -0.32

Inter-state

War

-0.92*** -0.02 -4.12 -0.55*** -0.21** 0.32*** 3.33** -4.11

Civil War

(ESCWA)

-0.13 0.13 1.94 -1.38*** -0.03 -0.88 2.43** 15.23***

Inter-state

War

(ESCWA)

-1.63 -2.73*** -26.47 -1.78 -0.26 -0.03*** 0.02 -0.06

GDP p.c. 10.63*** 1.96*** 30.19*** 8.13*** 2.32*** -0.81 -0.01 2.36*

Human = av. years of schooling * life expectancy; Immunization = % children aged 12-

23 months that have been immunized against measles.; Social: weighted av. of (i) av.

years of education in the population, (ii) life expectancy, and (iii) rate of children

immunization. Access to water, maternal mortality, child malnutrition are not significant

after controlling for PC GDP.

Estimated Impact of Conflict on Development Civil Conflict (%) Inter-state Confl (%)

All

Countries

ESCWA All

Countries

ESCWA

GDP p.c. (without Investment) -14.70 -17.40 -8.03 -8.03

GDP p.c. (with Investment) -15.15 -18.50 -7.06 -7.06

GDP p.c. (direct war effect) -1.70a -1.70a -1.90b -1.90b

HDI -7.80 -9.20 -8.85 -8.85

Social Indicators -24.67 -27.44 -10.36 -19.32

Immunisation Rate -8.24 -9.35 -3.31 -3.31

Life Expectancy -1.98 -2.93 -1.96 -1.96

Average Years of Schooling -4.56 -4.56 -6.34 -6.34

Access to Sanitation Facilities -6.86 -6.86 -9.01 -12.12

Child Mortality 12.11 14.02 15.02 15.02

Income Inequality -0.80 37.5 -0.40 -0.40 Notes: Estimated effect of one additional year of war. For human development, immunization rate, life

expectancy, average years of schooling, access to sanitation facilities, child mortality, and income inequality,

the percentage is computed on the sample mean value of the indicator. For social development, the

percentage is computed on the sample standard deviation of the indicator.

Conflict – FS Nexus

0.0

3333.3

6666.7

10000.0

0.0 40.0 80.0 120.0

IRQSDN

PAL

YEM

ceryld vs FSI

FSI

ce

ryld

-0.5

0.3

1.2

2.0

0.0 40.0 80.0 120.0

SDN

YEM

LOG10(foodimpshr) vs FSI

FSI

LO

G1

0(f

oo

dim

psh

r)

3.1

3.3

3.4

3.6

0.0 40.0 80.0 120.0

SDNPAL

YEM

LOG10(kcal) vs FSI

FSI

LO

G1

0(k

ca

l)

0.0

4.0

8.0

12.0

0.0 40.0 80.0 120.0

IRQ

SDNYEM

PubHealth vs FSI

FSI

Pu

bH

ea

lth

Post-conflict Challenges (1)

• Service provision in post-conflict is particularly challenging

• Populations needs are most acute and particularly concentrated in

this phase

• Public institutions and governance are particularly weak and

fragmented (center-local divides and horizontal cleavages)

• Elites capture and patronage risk is higher

• Different political interests, approaches, and parallel diplomatic,

military, and development-sponsored activities, reflected in

fragmented institutional mechanisms

• Limited capacity of military aid and its lack of coordination with ODA

• The short-term aid governance approach often prevails over the

long-term one (PIUs vis-à-vis governmental staff, shopping lists,

subcontracting of essential services, fragmented short-term small

scale projects)

• Risk of emergency/aid dependence

Post-conflict Challenges (2) Crowding-in or out Effect of Military Expenditures vs Social Expenditures? (% of GDP)

Conflict-affected

countries tend to

have over-inflated

wage bills that can

reach up to 1/3 of

government budget

(OPT, Iraq, Yemen)

Country

Military

expenditure

average

Public education

expenditure

average

Public health

expenditure

average

2000-

2004

2005-

2009

2001-

2004

2005-

2008

2000-

2004

2005-

2009

Bahrain 4.40 3.36 - 3.10 2.79 2.66

Egypt 3.24 2.50 4.80 4.06 2.32 2.12

Iraq 2.38 4.54 - - 1.01 2.58

Jordan 5.74 5.22 - - 4.86 5.30

Kuwait 6.92 3.79 6.30 4.24 2.49 1.92

Lebanon 4.91 4.29 2.64 2.46 3.44 3.93

Oman 11.89 9.86 4.05 3.72 2.56 1.99

Qatar 3.88 2.25 2.14 - 2.37 2.07

Saudi Arabia 9.80 8.93 7.27 5.97 2.99 2.78

Sudan 3.77 4.24 - - 1.07 1.88

Syria 5.49 4.22 - 5.09 2.21 1.45

UAE 8.40 5.73 1.84 1.09 2.44 1.81

Yemen 6.16 4.62 9.63 5.15 2.42 1.62

ESCWA average 5.92> 4.89> 4.83> 3.88~ 2.71< 2.67<

Arab Region 6.40 5.28 5.07 3.95 2.57 2.44

EAP 1.49 1.58 3.98 3.79 4.69 4.28

LAC 1.35 1.36 4.18 3.96 3.19 3.51

World average 2.39 2.48 4.33 4.45 5.64 5.76

FS, Vulnerability, and Conflict - Vulnerability to shocks makes poor households risk averse in their

asset-allocation strategy and this aversion is even more pronounced

in conflict-affected areas often characterized by a cascading series

of a combination of conflict-related, natural shocks, and international

price shocks with the result of ever-decreasing food-security levels

and passing up more risky but more profitable businesses.

- Complementing social protection with government supported forms of

insurance (but eventually market-based) can help the poor to

improve their risk copying strategies

Natural

Shock

Conflict-driven

Shock

Commodity

price Shock

Review of Food Aids • Food Aid highly volatile in the last two decades partly due to donors’

policies not always based on needs assessment

• Food Aid not a tool to address long-term FS

• Need for closer coordination among relief agencies and for medium-

term budgeting

• Food Aid works when local economic policy is addressed, it is

temporary and limited to contexts lacking institutions and markets

• Need to coordinate short-term relief ops with medium-term

considerations (WFP P4P)

Volatility of Humanitarian and Food Aid

0

200

400

600

800

1000

1200

1400

1600

1998 2000 2002 2004 2006 2008 2010

Afghanistan

Angola

DRC

Ethiopia

Indonesia

Iraq

OPT

Somalia

Sudan

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

Mt

Period 1990-2008

Yemen

Syria

Sudan

OPT

Lebanon

Jordan

Iraq

Egypt

But aid is also volatile at the regional level

20

Deviation of Gulf state ODA and crude oil price from 1970–2007 average

Governance deficit – conflict trap (I)

21

The risk of renewed conflict in countries with good governance drops rapidly after conflict. In countries characterized by poor governance, this process takes much longer. Hence, improving governance is an important part in reducing conflict, and good governance will in turn decrease the likelihood of conflict.

Governance deficit – conflict trap (II)

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

Voice and Accountability

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

Government Effectivness

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

Rule of Law

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

Regulatory Quality

-2.5

-2

-1.5

-1

-0.5

0

Political Stability

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

19

96

19

98

20

00

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

Control of Corruption

Importance of land rights in conflict (I)

23

Insecure or weakly enforced property rights:

• Increase risk of expropriation, which diminishes incentives to invest

and to produce

• decrease productivity by necessitating the need to defend property

in insecure environments

• do not allow productive assets to be transferred to those who can

use them for their livelihood (subsistence farmers) or most

productively (commercial farmers)

• do not allow a crucial asset supporting other transactions such as

obtaining financing

• can cause both grievance and greed

• exacerbate over-urbanization and socio-economic disparities in the

aftermath of a conflict

• are an important driver of food security and therefore of social

stability given that food price shocks hit the landless hardest and

increase the incidence of riots

Importance of land rights in conflict (II)

24

• Friction or even open conflict between modern state-led

(+ colonial) and customary or tribal property rights

systems

• Property disputes constitute the single largest cause of

backlog cases in the judicial systems of most post-

conflict countries including LDCs (great entry point to

reform the judiciary)

• Post-conflict government capacity is weak in terms of

systematic and consistent law enforcement and

informal governance systems tend to be relatively

stronger

• However, recent experiences have shown that

remedies to this inherent contradiction are possible

(DRC, Mali, Zimbabwe)

Recommendations (I)

• The breadth and depth of available data require immediate and

significant improvements.

• Conflict - Poverty (and informality) – Food Insecurity compound into

inter-generational transmission of poverty, inequality, and conflict

relapse

• One year of a civil conflict in the region is enough to cancel

development progress made by an average ESCWA country in 5-10

years

• The potential presence of endogeneity suggests an existence of a

‘feedback-loop’ whereby the process of conflict and de-development

feed on each other. In such instances, a ‘circuit-breaker’ is required

to break this symbiotic vicious cycle.

Recommendations (II) • Governmental action can be directed at reactivating the channels through

which public goods are delivered.

• Closer regional integration and better business environment can increase

the peace dividend on these countries.

• Expansion of family (and nutrition support) programs especially in rural

areas to improve maternal health, provision of education with specific focus

on girls education, and reduce fertility rates.

- Support community-based development funds for infrastructure and services

→ labor generation, social capital and peace dividends

- More use of JAM, joint CAS, PRSPs, SWAPs

- Regional action aimed at tapping Sudan’s agricultural potential in a

transparent manner

- Review land policies in conflict-affected environments

- Learn lessons from food aid and relief modalities and how to link them to

livelihood programs (WFP’s P4P)

- Reform CERF and establish a food aid emergency reserve (ASEAN) or

multi-annual regional fund managed by WFP/OCHA

Recommendations (III)

• Strengthen governments’ efforts to preserve water resources

and increase their rational utilization.

• Agriculture (and the rural poor) in these countries is trapped

in low value-added activities and mainly characterized by low

productivity farming. It is therefore vital to increase efficiency

in rain-fed agriculture, enhance ag R&D, and promote

market linkages.

• Donors need to move towards multi-year budgeting for their

transfers to the relief agencies working in a conflict-affected

country so that they can improve their planning and increase

efficiency gains in their operations. Due to absorptive

capacity constraints aid disbursements should gradually rise

during first 3-5 years and then slowly revert back.

Recommendations (IV)

• With respect to the issues specifically raised in this report,

future research should provide an even more

comprehensive account of cross-regional differences in the

development costs of war.

• More work will be needed in the future in order to provide

theoretical foundations to our findings: why is the negative

effect of conflict sometimes associated with interstate

conflict while other times is associated with civil conflict?

Why is inequality disproportionally affected by conflict in this

region? And what can we do to reduce the overall effect?

Enhance Regional Cooperation through FS

Conflict and FS are two regional problems that require a strong regional approach

• How can cooperation be promoted?

– Create Awareness: Previous Pan-Arab cooperation efforts were driven by ideology, not necessity. Cooperation in light of common threats to the conflict-food security nexus is a necessity

– Build Political Commitment: EU and ASEAN were launched to promote peace and stability. The obstacles to successful regional integration were not necessarily easier than in the Arab world today

– Provide Incentives: Cooperation must pay a peace dividend, financed by transfers and the creation of new economic opportunities. It is a positive sum game.

– Promote specific actions: reinvigorated supranational actions need to be undertaken with specific responsibilities in the area of social assistance programs, rural development, gender and family planning, and the advancement of an Arab common market.

– Manage External Support: The international community can help increase the opportunity cost from engaging in conflict through greater regional economic cooperation, including the dismantling of protectionism (by trade partners) and more efficient development aid.

Thank you

intini@un.org