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Long-term economic consequences of the war in the former Yugoslavia

Photo: Roman Wimmers

Publish Date: 20.07.2022

Category: Our contribution to sustainable development goals

Sustainable development goals: 1 No poverty, 8 Decent work and economic growth (Indicators)

The civil war that took place in Yugoslavia between 1990 and 1999 was one of the bloodiest military conflicts in Europe since the end of the Second World War, resulting in more than 140,000 deaths and more than 2 million refugees, with more than 2.4 million other people forcibly displaced. It was the worst outbreak of ethnic violence, hatred and instability since the end of the Second World War. Two researchers from the University of Ljubljana’s School of Economics and Business, Dr Aleksandar Kašeljević and Dr Rok Spruk, have carried out a study of the long-term economic costs of the war in the former Yugoslavia. In the light of the question of the long-term nature of the consequences of war on the economic and social development of the countries involved, the study looked at armed conflicts in the former Yugoslavia from the point of view of lost economic growth. An understanding of the opportunity costs of war provided a clear and quantitatively meaningful insight into the scale of the economic consequences of conflicts on economic growth and development, which is of key importance for understanding the permanent or temporary character of the consequences and effects of war.

On the basis of extensive quantitatively supported analysis, we estimated the long-term effects of the civil war in the former Yugoslavia on the economic growth of the former republics. To this end, using a synthetic control estimator, we evaluated a counterfactual scenario and built a hypothetical economic growth trajectory for the former republics in the case of the peaceful disintegration of the former Yugoslavia on the basis of a comparison with countries outside Yugoslavia that share similar institutional and structural characteristics with the former Yugoslav republics at a comparable level of economic, social and demographic development. In the course of this study, we found that the civil war in the former Yugoslavia created profound losses of economic growth. Quantitative assessments of the canonical model of economic growth showed us that in the case of the peaceful disintegration of the former Yugoslavia, the per capita GDP of the former republics would have increased considerably up to the present day, on a scale ranging between 25% in Slovenia and as much as 59% in Kosovo. Thus none of the former republics has succeeded in achieving the level of per capita GDP and development that they would have done in the hypothetical absence of war and a scenario involving the peaceful disintegration of Yugoslavia. Slovenia has come closest to this level, but by no means close enough to suggest that the effect of the war is temporary. In contrast to findings from the literature, where civil wars have a temporary negative effect on economic growth and social development, we find that the war in the former Yugoslavia has had a strongly lasting effect on the economic development paths of the former republics.

The results of the study have been published in the journal Defence and Peace Economics

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