# **3 Recovery from Conflict**

The analysis of the contemporaneous effects of conflicts provided in the previous section is crucial to understand the long term effects that violence has on post-war economic development. In the present section, by analyzing the economic conditions of FCS during the recovery period, we will learn that the key element needed for long term development is peace stability. In fact, during recovery FCS grow as fast as other countries; while, as we learned in the previous section, during conflict period growth is substantially hampered. Therefore the occurrence of renewed outbreak of conflict, that disrupts the economic conditions of the affected countries and break the recovery process, is the crucial element on which depends the success or the failure of the post-conflict development. In this section we analyze all the aspects of recovery that, combined with the evidence provided in the previous section, allow us to draw these conclusions.

According to the WDR 2011, one of the most problematic challenges that FCS face is the occurrence of repeated cycles of violence. On the one hand, they have a high probability of relapsing into conflict within relatively short time periods. On the other hand political violence might evolve into other forms of violence, such as organized crime. This transformation can hinder the recovery and the economic and social development of the areas of interest.

From the previous section, we know that countries and ethnic groups with conflict experience dramatic economic decline. However, this only leads to a _conflict trap_ if 1) the weakened economy does not recover and 2) if the absence of a recovery leads to renewed Surprisingly, perhaps, there is quite a lot of controversy in the academic literature regarding the long-term effects of violence on economic activity.<sup>11</sup> There are both theoretical and empirical reasons for this controversy. Theoretically, classic growth models like the Solow model assume that countries converge to their own steady state and that countries face decreasing returns to human and physical capital. An exogenous destruction of production factors through war will therefore result in a more rapid accumulation of physical or human capital after the conflict.<sup>12</sup> In its plainest form, this model predicts that countries will grow much quicker after a negative exogenous shock. The long term economic costs of conflict are therefore less severe.

Empirically there is some support for this hypothesis from external wars. In an early contribution, Organski and Kugler (1977) show that output of winners and, more surprisingly, also losers of the World Wars caught up with non-affected countries after 15 to 20 years. This is supported by additional evidence from the micro level. Davis and Weinstein (2002) show that Japanese cities that were bombed had completely recovered their relative size 20 years after the US bombing in World War II. In a similar vein, Brakman et al. (2004) find that bombing of Germany had a significant but temporary impact on postwar city growth in West Germany but a sustained impact in East Germany. Miguel and Roland (2011) study a whole battery of indicators from

> 11For an excellent review see Serneels and Verpoorten (2015).

> 12Collier (1999), for example, uses this logic to argue that longer civil wars will be followed by stronger recoveries because the capital stock has adjusted downwards.

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