This study provides a global analysis of the effect of conflict exposure on firms' performance, combining geolocalized longitudinal firm-level data and information on political violence events from 91 countries between 2006 and 2019. Higher conflict exposure does not affect firm profits, as it reduces both sales and total costs. Sales decline due to the conflict-induced reduction in the availability of production inputs and the increase in informal competition. Firms react to lower sales by reducing labor costs and expenditure on other production inputs. The effect of conflict is more detrimental for firms in countries with low-quality bureaucracy and that are initially at peace.
Authors
Brancati,Emanuele, Di Maio,Michele, Gatti,Roberta V., Islam,Asif Mohammed
- DOI
- https://dx.doi.org/10.1596/1813-9450-10898
- Disclosure Date
- 2024/09/05
- Disclosure Status
- Disclosed
- Doc Name
- Conflict and Firms' Performance : A Global View
- Originating Unit
- Off of Sr VP Dev Econ/Chief Econ (DECVP)
- Pages
- 47
- Published in
- United States of America
- Series Name
- Policy Research working paper; PROSPERITY;
- Unit Owning
- Office of the Chief Economist (MNACE)
- Version Type
- Final
- Volume No
- 1
Table of Contents
- 1 Introduction 4
- 2 Data 6
- 2.1 Firm data 6
- 2.2 Conflict data 8
- 2.3 Other data 10
- 3 Empirical Strategy 11
- 4 Results 12
- 4.1 Conflict exposure, sales, total costs, and profits 12
- 4.2 Mechanisms 14
- 4.2.1 Raw materials and intermediate inputs 15
- 4.2.2 Labor 15
- 4.2.3 Market competition 17
- 4.2.4 Demand 17
- 4.2.5 Other obstacles to firms’ activity 18
- 4.3 Heterogeneity 18
- 4.3.1 Mechanisms heterogeneity 20
- 5 Conclusions 21
- References 22
- Figures 26
- Tables 27
- A Appendix: Figures 31
- B Appendix: Tables 32
- C Data Appendix 45
