Investment and Institutions in Post-Civil War Recovery

Abstract

Theories of post-Civil War recovery predict a “peace dividend” via the re-accumulation of capital per worker. I suggest that such a recovery will occur only when quality institutions have been established. I couple data on civil wars from 1965 to 2000 with the measure of legal structure and protection of private property from the Economic Freedom of the World Index. Results from growth regressions using an interaction between an index of institutions, and investment/GDP confirm that weak institutions inhibit recovery in the post-conflict environment, providing empirical support for a model of conflict recovery via capital accumulation, conditional on institutions.

Keywords: Civil War, post-war recovery, institutions, investment, peace dividend

JEL Classification: 011, 017, 043, 050