Chapter 8 Does fiscal policy differ between successful and unsuccessful post-conflict transitions? Lessons from African Civil Wars

• Date: 08 July 2010
• Published date: 08 July 2010
• Pages: 123-145
• DOI: https://doi.org/10.1108/S1572-8323(2010)0000014012
• Author: Fabrizio Carmignani,Adrian Gauci

CHAPTER 8

DOES FISCAL POLICY DIFFER

BETWEEN SUCCESSFUL AND

UNSUCCESSFUL POST-CONFLICT

TRANSITIONS? LESSONS FROM

AFRICAN CIVIL WARS

Fabrizio Carmignani and Adrian Gauci

ABSTRACT

Purpose – The chapter studies the impact of f‌iscal policy on the

stabilisation of peace in the aftermath of a civil war.

Methodology – We use data from African war-torn countries and study

the issue of post-conf‌lict stabilisation from an empirical perspective.

We employ probit analysis to formally estimate the effect of f‌iscal policy

on the probability of maintaining peace in the post-conf‌lict period.

Findings – The success of post-conf‌lict transition does not require

downsizing the government. On the contrary, successful post-conf‌lict

transitions are on average characterised by an increase in the size of the

government. However, both expenditures and revenues increase at a

comparable pace. Moreover, in successful post-conf‌lict transitions, the

increase in government size involves an increase in the incidence of capital

expenditure relative to government consumption. On the revenue side,

Economics of War and Peace: Economic, Legal, and Political Perspectives

Contributions to Conf‌lict Management, Peace Economics and Development, Volume 14, 123–145

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ISSN: 1572-8323/doi:10.1108/S1572-8323(2010)0000014012

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budgetary grants appear to strengthen the chances of success. A heavier

debt burden does not seem to compromise the probability of successfully

completing the post-conf‌lict transition.

Research limitations/implications – Future research should (i) extend

the sample to non-African countries, (ii) extend the analysis to other

macroeconomic policy variables and (iii) supplement cross-country

analysis on the role of f‌iscal policy with country case studies. A potential

application of the f‌indings of this chapter is the construction of a model to

predict the evolution of currently ongoing post-conf‌lict transitions.

Social implications – The f‌indings bear implications on how governments

should conduct f‌iscal policy in the aftermath of a conf‌lict. They also

provide guidelines for the international community on how best to assist

post-conf‌lict economies.

Originality – Papers concerned with the determinants of peace in the post-

conf‌lict period do not generally look at the potential contribution of f‌iscal

policy. This chapter is the f‌irst attempt, to the best of our knowledge, to

provide econometric evidence on the role of f‌iscal policy as a possible

driver of peace stabilisation in the aftermath of a conf‌lict.

INTRODUCTION

Conservative estimates suggest that in the f‌ive decades following the end of

World War II, the total death toll generated by civil wars is f‌ive times higher

than the interstate death toll. More than 70 countries (roughly one-third of

the total membership of the United Nations system) experienced episodes

of large-scale civil violence, most of which produced massive refugee f‌lows

and economic devastation (Fearon & Laitin, 2003). Given these f‌igures, it is

not surprising that the causes of civil war have become the object of a recent,

lively literature at the intersection of economics and political science

(see, inter alia, Collier & Hoeff‌ler, 1998;Collier, Hoeff‌ler, & Rohner, 2008a;

Miguel, Satyanath, & Sergenti, 2004;Lujala, Gleditsch, & Gilmore, 2005;

Humphreys, 2005). Within this avenue of research, specif‌ic attention is

now being devoted to the aftermath of a conf‌lict.

1

As empirically shown by

Collier and Hoeff‌ler (2004), the risk of a civil conf‌lict decreases with the

time elapsed since the last civil conf‌lict. The implication is that the post-

conf‌lict period is particularly risky, and hence, it is important to study the

conditions for the consolidation of peace in the aftermath of a conf‌lict.

FABRIZIO CARMIGNANI AND ADRIAN GAUCI124