| This study focuses on microeconomic impacts of war on the economy. Using a panel country fixed effects model, I analyze the impacts of wars (civil war, international war) on the movements of important human resource indicators separately by the degree of severity of war and by the duration of war. With respect to human capital, I consider school enrollment rates, life expectancy, youth unemployment rates and labor participation rates. One potential problem with measuring the effects of war is that wars are not purely exogenous unexpected events. Not taking into account the anticipation of war can lead to biased estimates of the impact of wars. This study examines the effect of international and civil wars on aspects of human capital development taking account the anticipation of war. I divide wars into two groups based on estimates of the probability countries will be engaged in a war. I then examine the impact of expected and unexpected wars on human capital resource indicators. The impact of war on human capital development frequently seems not to stay within the border but to cross the border. This study estimates the effect of neighbor countries' wars on one's own country's human capital resource indicators. In particular I examine the effects of neighbors' wars on human resource indicators in case that one's own country is at war as well as when one's own country is at peace. I find empirical support that human capital resources are detrimentally influenced by war and the negative impacts of war are intensified by severity of war and by duration of war. My empirical evidence shows that unexpected wars have much greater effects on human capital resource than expected wars. I also find that human capital resources are adversely affected by wars in neighboring countries. Based on the endogeneous growth theory, my empirical analysis demonstrates that the adverse effects of war on human capital development significantly reduce a country's productivity and thus, eventually hamper long-run economic growth. |
