Economic legacy effects of armed conflict: Insights from the civil war in Aceh, Indonesia

Abstract

The province of Aceh in Indonesia provides a promising case for studying the economic legacy effects of conflict given subnational district-level data on violence and gross domestic product. We demonstrate specific negative economic legacy effects of armed conflict despite a general peace dividend: whilst all districts in Aceh grow faster after conflict ends in 2005 than during the conflict, the districts that suffered relatively more from violence during the war grow relatively more slowly during peacetime than districts that experienced relatively little violence. These negative legacy effects are relatively short-lived, however, and are no longer statistically significant from 2009 onwards. JEL classification: O40, O47, Q54.