Long-Term Economic Consequences of Factious Tensions: Evidence from Lebanon

We examine the effect of political factionalism in the presence of weak state capacity on long-term economic growth. To this end, we exploit the 1958 civil uprising between Maronite Christian and Sunni Muslim factions in Lebanon to estimate the impact of factious tensions on long-term growth. To isolate the impact of the uprising, we use synthetic control estimator and match Lebanon’s pre-1958 growth and development trajectory with the rest of the world where such uprising did not occur, and construct the counterfactual growth trajectory in the hypothetical absence of the political factionalism. Our evidence indicates large and pervasive negative growth effects of factionalism. In the absence of factionalism-led uprising, our estimates imply that Lebanon’s per capita income down to the present day is four times higher than the actual level, and does not seem to be driven by pre-existing or subsequent trends and shocks. The negative long-term growth effect of factionalism is robust to a battery of spatial and temporal placebo checks, covariate selection tests and is not sensitive to the composition of control groups.