Fiscal Consequences of Armed Conflict and Terrorism in Low- and Middle-Income Countries

By S. Gupta, Benedict Clements, R. Bhattacharya, Shamit Chakravarti. Social Science Research Network, 2002

273 citations recorded by the source corpus.

This paper analyses the fiscal effects of armed conflict and terrorism on low- and middle-income countries. An analysis of 22 conflict episodes shows that armed conflict is associated with lower growth and higher inflation and has adverse effects on tax revenues and investment. It also leads to higher government spending on defense but this tends to be at the expense of macroeconomic stability rather than at the cost of lower spending on education and health. Our econometric estimates are consistent with the hypothesis that conflict and terrorism have a significant negative impact on growth through changes in the composition of government spending. On the revenue side the fiscal accounts are affected only through reduced real economic activity. Thus there is potential for a sizable peace dividend for countries that are able to resolve conflict and terrorism.

View Paper: https://www.semanticscholar.org/paper/bef15cff3f00e1116fe2493da6bbd2941ebe8188

Citations in the corpus

• Calculating Tragedy: Assessing the Costs of Terrorism (2004, unknown): “Related issues not discussed in this paper are the effects of terrorism on fiscal policy (see e.g. Gupta et al., 2004; Eichenbaum and Fisher, 2005) and the discussion about the insurability of terrorism risks (see e.g. Cummins and Lewis, 2003; Kunreuther et al. 2003; Brown, 2004).”
• Democracy under the Gun Understanding Postconflict Economic Recovery (2009, unknown): “…of physical damage to new investments or their expropriation by armed actors (Artadi and Sala-i-Martin 2003; Blomberg and Hess 2002; Collier 1999; Gupta et al. 2004; Imai and Weinstein 2000; Kang and Meernik 2005; Koubi 2005; Mohammed 1999; Murdoch and Sandler 2002), and the negative economic…”
• The Origins of Terrorism - Cross-Country Estimates on Socio-Economic Determinants of Terrorism (2011, unknown): “Such negative effects may result in a reduction of overall economic growth (Abadie and Gardeazabal, 2003; Gupta et al. 2004; Crain and Crain 2006; Gaibulloev and Sandler, 2008), matching the evidence that political instability is detrimental to growth (e.”
• FIGHTING TERRORISM: ARE MILITARY MEASURES EFFECTIVE? EMPIRICAL EVIDENCE FROM TURKEY (2010, unknown): “…O16 I.I. INTRODUCTION Terrorist attacks around the world have increased in the last few decades and anti-terrorism efforts rank high on the political agendas.1 As Gupta et al. (2004) report, most of the armed conflicts and terrorist activities have taken place in low- and middle-income countries.”