Olaf J. de Groot

How Many Bucks in a Bang: On the Estimation of the Economic Costs of Conflict

The estimation of the costs of conflict is currently receiving a lot of attention in the literature. This paper aims to give a thorough overview of the existing literature, first by addressing the history of case studies that address conflict costs and second by looking at the existing body of cross-country analyses for conflict costs. In addition to the existing cross-country literature, a number of studies that only concern themselves with particular elements of conflict costs are included as well. In the end, this paper combines the insights from these previous analyses to explore how much room there is to further improve the existing studies. Specific recommendations are given how to proceed with the development of the field of conflict cost measurement.

Consumption growth accounting

The methodology in this paper combines an input-output structural decomposition approach with the supply-side perspective of mainstream growth accounting. In explaining the intertemporal change in consumption per worker, three sets of effects are distinguished. First, contributions due to several types of technological changes are considered. Second, effects caused by changes in international trade are discerned. Third, composition effects that reflect structural shifts in demand (including changes in tastes) are quantified. As an empirical illustration, we analyze the developments in the U.K. between 1979 and 1990.

The Economic Costs of the German Participation in the Afghanistan War

In this article, we estimate the total costs of the German participation in the Afghanistan war, both past and future. This is a hugely complex and uncertain calculation, which depends on several important assumptions. These assumptions pertain to the different cost channels and the shares of these channels that can be attributed to the German participation in the war. By calculating the costs of the German participation, we provide a framework for other researchers to do the same with respect to other countries. The article can function as a roadmap for researchers focusing on this topic. In the end we find that, in the most realistic of several possible scenarios regarding the duration and intensity of the German participation in the war in Afghanistan, the German share of the net present value of the total costs of the war ranges from 26 billion Euro to 47 billion Euro. This large range reflects the uncertainties with which the costs must be estimated. On an annual basis, we estimate that the German participation in the war costs between 2.5 and 3 billion Euro. This contrasts with the official war budget, which is little over 1 billion Euro for 2010, showing that governments may not adequately represent the costs of military action.

Gov-Arrrgh-Nance: Jolly Rogers and Dodgy Rulers

In this paper, we argue that the effect of governance on the emergence of crimes of different levels of sophistication is highly non-linear. State failure, anarchy and a lack of infrastructure are not conducive to establishing any business, including illicit enterprises. At the bottom of the spectrum, therefore, both legal business and criminal gangs benefit from improved governance. With further improvements in governance criminal activities decline. We find strong and consistent support for this hypothesis using the International Maritime Bureaus dataset on piracy. Piracy is reported by ship-owners, giving a unique insight into crime in badly governed countries which were systematically excluded from previous analyses. We show that profitable forms of piracy flourish where on the one hand there is stability and infrastructure, but on the other hand the state does not have the capacity to intervene and/or bureaucrats can be bribed to turn a blind eye. For minor acts of theft from ships the pattern is quadratic: piracy first rises and then falls as governance improves.

The Influence of Conflict on the Demand for Education in the Basque Region

It has previously been shown that civil conflict influences many economic factors, including education, which play an important role in development and economic growth. Previous authors working on the influence of conflict on education have, however, always focused strongly on the supply-side effects, whereas this paper examines the influence of conflict on the demand for education. It is theoretically shown that, under relatively general conditions, individuals living in a conflict area have an incentive to increase their level of education and that this effect depends on the individuals skill level. This hypothesis is then tested using the conflict in the Basque Region as a case study, which is an example of a conflict in which one would not expect strong supply-side effects. Using the other Spanish regions, an artificial region is created in which the population has a similar educational distribution as in the Basque Region. When comparing the true and artificial regions, it can clearly be seen that for individuals with a medium level of education, there is a strong incentive to increase their education level, which is in concordance with the theoretical model.

Generational Accounting in Latvia: Time for Action

The study seeks to analyse the long-term sustainability of fiscal policy in Latvia. Using a methodology called Generational Accounting, the net tax burdens of different currently living generations are calculated. Using these generational accounts, the residual ne tax burden of future generations is determined and it is determined that the current fiscal policy stance is not sustainable. The generational imbalance amounts to about 260% of GDP, which is near the European avarage. The necessary fiscal adjustments are relatively small, but still significant. An overall tax increase of 8.5% would be required to close the generational gap. Other policy options could be to decrease transfers by 17.5% or government consumption by 25.0%. Alternative scenarios all lead to significant generational imbalances as well. On the other hand, a number of factors not included in this study may aid Latvia in achieving generational fairness and long-term fiscal sustainability.Abstract This study seeks to analyse the long-term sustainability of fiscal policy in Latvia. Using a methodology called Generational Accounting, the net tax burdens of different currently living generations are calculated. Using these generational accounts, the residual net tax burden of future generations is determined and it is determined that the current fiscal policy stance is not sustainable. The generational imbalance amounts to about 260% of GDP, which is near the European average. The necessary fiscal adjustments are relatively small, but still significant. An overall tax increase of 8.5% would he required to close the generational gap. Other policy options could be to decrease transfers by 17.5% or government consumption by 25.0%. Alternative scenarios all lead to significant generational imbalances as well. On the other hand, a number of factors not included in this study may aid Latvia in achieving generational fairness and long-term fiscal sustainability.