Economics of Armed Conflicts and Governance: An Empirical Study Focusing on South Asia
Abstract
This study examines the effects of governance on armed conflict and the associations between economic factors, external finances (remittances), natural calamities, and armed conflicts. Panel data are used covering the South Asia region from 2002 to 2018, applying the logit and ARDL models. The results show that government effectiveness, political stability and absence of violence/terrorism, and regulatory quality, the rule of law, and droughts/floods have a negative relationship, with the dependent variable, armed conflict. On the other hand, we find that population and remittances, and Voice and Accountability have positive association with armed conflict, as per logit analysis. Based on ARDL estimations, government effectiveness, a proxy variable for governance, political stability and absence of violence/terrorism, and the rule of law have negative and highly significant association with armed conflict. We imply that with an increase in terrorist activities, the governance level, political stability, the rule of law, and regulatory quality deteriorate. In other words, good governance can reduce the likelihood of armed conflict, while population and remittances can fuel armed conflict. Moreover, natural calamities have an inverse relationship with armed conflict. Surprisingly, conflicts help increase the voice of and demand for accountability by general public in the conflict zone.
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