A case study of redundant defence workers

In this article, the influence of conflict on the economies of neighbouring countries is discussed. The results from previous papers show a strong negative effect for an entire area around a country suffering from conflict, but this paper reaches a different conclusion, by using more recent data and adjusting the methodology previously employed. Additionally, a new type of contiguity matrix is constructed and used in the actual analysis. The final analysis consists of a large number of regressions and concludes that conflict actually has two opposing effects. First, like conflict countries themselves, directly contiguous countries actually suffer from the negative effects of proximate conflict. Secondly, however, there is also a positive spillover of conflict, which affects non‐contiguous countries and this effect is larger for countries that are closer to the conflict country. The results from the paper predominantly hold for the most violent kind of conflict.