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date: 23 September 2020

Abstract and Keywords

This article takes a macroeconomic perspective, looking at a cross section of nations over time, to provide further evidence on the costs of conflict, both internal and external. Adapting a model of Lucas (1987) intended to measure the costs of business cycles, it assesses the impact of conflict viewed as an aggregate “shock” to national consumption and welfare. The article suggests that the estimates of the permanent welfare loss resulting from war, under conservative scenarios, are remarkably large and much higher than the estimated costs of business cycles.

Keywords: conflict costs, business cycles, welfare loss, economic welfare

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