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The Economic Costs of Conflict: A Case Study of the Basque Country

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Abstract:

This article investigates the economic effects of conflict, using the terrorist conflict in the Basque Country as a case study. We find that, after the outbreak of terrorism in the late 1960's, per capita GDP in the Basque Country declined about 10 percentage points relative to a synthetic control region without terrorism. In addition, we use the 1998-1999 truce as a natural experiment. We find that stocks of firms with a significant part of their business in the Basque Country showed a positive relative performance when truce became credible, and a negative relative performance at the end of the cease-fire.

Document Type: Forum Article

DOI: http://dx.doi.org/10.1257/000282803321455188

Publication date: March 1, 2003

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aea/aer/2003/00000093/00000001/art00006
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