American Economic Review: Vol. 93 No. 1 (March 2003)
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The Economic Costs of Conflict: A Case Study of the Basque Country
Abadie, Alberto, and Javier Gardeazabal. 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country ." American Economic Review, 93(1): 113-132.
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.
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