## Conflicts and Growth: The R&D Channel

_IMF Working Papers, May 10, 2024_

## Source details

**Canonical URL:** [Conflicts and Growth: The R&D Channel](https://www.imf.org/en/publications/wp/issues/2024/05/10/conflicts-and-growth-the-r-d-channel-548836)

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## Bibliographic details
- Authors: Can Sever
- Published: May 10, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400276569.001

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### Summary
- Violent conflicts are typically associated with a long-lasting drag on economic output.
- The study builds causality in the conflict–growth nexus by exploiting within-country variation across industries’ technological intensity.
- It identifies a channel through which conflicts can impact growth: by hindering R&D activities.
- Analysis is based on industry-level data from two-digit manufacturing industries for a large sample of countries over the last four decades.
- The results show that conflicts lead to a decline in labor productivity growth, particularly in industries with higher technological intensity.
- The additional labor productivity loss in high-tech industries in the years of conflicts does not seem to be offset in the post-conflict period.

### Methodology
- Exploits within-country variation across industries’ technological intensity to build causal inference.
- Uses industry-level data from two-digit manufacturing industries.
- Covers a large sample of countries over the last four decades.

### Key Findings
- Conflicts lead to a decline in labor productivity growth.
- The decline is particularly pronounced in industries with higher technological intensity.
- The estimated magnitude of the differential effect of conflicts on labor productivity growth in high-tech industries is large.
- The additional labor productivity loss in high-tech industries during conflict years is not offset in the post-conflict period.
- Findings offer insight into observed patterns of durable declines in income in the aftermath of conflicts, given the role of technological progress and innovation in long-term economic growth.

### Policy Implications
- Protecting R&D activities and high-tech industries during conflicts may be critical to mitigating long-term output losses.
- Policies that facilitate the preservation or rapid restoration of innovation capacity post-conflict could help prevent durable declines in income tied to lost technological progress.
- Targeted support for technologically intensive sectors in post-conflict recovery strategies may be warranted to offset persistent productivity losses.

### Keywords and Classification
- Keywords: Conflict, economic growth and development, high-tech, innovation, R&D, war

*Conflicts and Growth: The R&D Channel — Can Sever, May 10, 2024.*

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## Content in this bundle

- **Working Paper**
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_Source: https://www.imf.org/en/publications/wp/issues/2024/05/10/conflicts-and-growth-the-r-d-channel-548836_