Ethnic Conflicts, Civil War, and Economic Growth: Region-Level Evidence From Former Yugoslavia

This paper studies the long-term effects of the Yugoslav civil war (1987-1995) on subnational economic growth across 78 regions in five former Yugoslav republics from 1950 to 2015. We construct counterfactual growth trajectories using a robust region-level donor pool from 32 conflict-free countries. Applying a hybrid synthetic control and difference-in-differences approach, we find that the civil war inflicted significant regional per capita GDP losses estimated at 38 percent relative to the synthetic counterfactual, with substantial regional heterogeneity. The most war-affected regions suffered prolonged and permanent economic declines, while north-western regions and capital cities experienced more transitory effects. Population displacement, ethnic fractionalization and polarization, and economic geography help explain cross-regional variation in GDP losses. Our results are robust to extensive variety of specification tests, placebo analyses, and falsification exercises.