Essays on Economics of Conflicts A Thesis Presented by Figo Sze Yeung Lau to Department of Economics Royal Holloway, University of London 2018 In Fulfillment of the Requirements for the Degree of Doctor of Philosophy in the Subject of Economics Declaration of Authorship I, Sze Yeung Lau, hereby declare that this thesis and the work presented in it is entirely my own. Where I have consulted the work of others, this is always clearly stated. Signed: ______________________ Date: ________________________ i Acknowledgement: I am grateful to Royal Holloway, University of London, not only for enriching my profession in economic science but also for waving beautiful memories throughout my study here. I am especially in gratitude to Professor Michael Spagat, who has guided me into the world of economics with countless help and support. I appreciate all the friends I met in Royal Holloway, who have brought everlasting happiness into my life. ii To My Mother Ng Oi-Lin iii Abstract Chapter 1: Conflict and Child Health: Evidence from the DRC Conflicts between 1996 and 2014 This paper uses four nationally representative household surveys to investigate the dynamics of children’s health during the DRC conflicts from 1996 to 2014. I find negative effects on child HAZ scores after the First and Second Congo Wars. The ceasefire period between 2003 and 2008 significantly enhanced child nutritional performance. In contrast, the subsequent conflict in Orientale, Nord-Kivu and Sud-Kivu worsened child HAZ scores again. Chapter 2: Conflict and Development: A Methodology by Using Outer Space Data This paper pioneers the use of night light density data from satellite pictures to study the impacts of war on economic performance in seven countries. The results vary by conflict, with clear negative effects in Syria and Iraq. The Afghan War appears to stimulate economic development while no statistically significant effect has been found for the case of Libya, Colombia, Chad and the DRC. In general, the impacts of war on economic development are heterogeneous, conditional on the country specific characteristics. Chapter 3: Conflict and Fertility: A Case Study by the DRC Conflicts This paper studies the impact of conflict on fertility in the Democratic Republic of Congo by employing four nationally representative household surveys, the results estimated by women between 15 and 49 years old display a lower fertility level during the ceasefire periods. In other words, conflict boosts the fertility level, which can be explained by a risk-insurance effect. However, this result suffers from omitted variable bias. For younger women samples between 15 and 23 years old, the estimation turns out to be insignificant. Hence, it shows that the DRC conflicts has not had a significant impact on fertility. iv Contents List of Acronyms ................................................................................................................................................. viii List of Tables ......................................................................................................................................................... ix List of Figures ......................................................................................................................................................... x List of Maps ........................................................................................................................................................... xi 1. Conflict and Child Health: .................................................................................................................................. 1 1.1 Introduction .................................................................................................................................................. 2 1.2 Theoretical Framework ................................................................................................................................ 6 1.3 Nutritional Indicators and Data Samples ...................................................................................................... 8 1.3.1 Nutritional Indicators ............................................................................................................................ 8 1.3.2 Data and Samples ................................................................................................................................ 10 1.3.3 Preliminary Observations .................................................................................................................... 12 1.4 Identification Strategy ................................................................................................................................ 15 1.4.1 Conflict Background and Identification .............................................................................................. 15 1.4.2 Conflict Level Classification .............................................................................................................. 19 1.4.3 Econometric Framework ..................................................................................................................... 21 1.5 Result Estimations ...................................................................................................................................... 23 1.5.1 Four Household Surveys with Gender Differences ............................................................................. 23 1.5.2 Four Household Surveys with Age Classification .............................................................................. 27 1.5.3 Individual Household Survey Investigation-A Short Term Analysis .................................................. 31 1.6. Robustness Check and Potential Bias ........................................................................................................ 35 1.6.1 Selection Bias ..................................................................................................................................... 35 1.6.2 Unobserved Endogenous Household Characteristics .......................................................................... 36 1.6.3 Aggregation at Provincial Level ......................................................................................................... 37 1.6.4 Displacement and Refugees ................................................................................................................ 38 1.7 Conclusions ................................................................................................................................................ 40 References ........................................................................................................................................................ 42 A Appendix ...................................................................................................................................................... 49 2. Conflict and Development: ............................................................................................................................... 50 2.1 Introduction ................................................................................................................................................ 51 2.2 Literature Reviews ..................................................................................................................................... 54 2.2.1 Conflict Effects on Economy .............................................................................................................. 54 2.2.2 Night Light as a Proxy for Economic Growth .................................................................................... 57 2.3 Theoretical Mechanisms ............................................................................................................................ 60 2.3.1 Conflict can lead to destruction of physical capital and reduced investment in physical capital. ....... 60 2.3.2 Conflict can lead to human capital loss and reduced investment in human capital ............................ 61 2.3.3 Conflict can cause population loss ...................................................................................................... 61 2.3.4 Conflict can reshape political structures and public policies .............................................................. 62 v 2.3.5 Conflict can revise total factor productivity ........................................................................................ 62 2.4 Data and Sample......................................................................................................................................... 64 2.4.1 US National Geophysical Data Center ................................................................................................ 64 2.4.2 DIVA-GIS ........................................................................................................................................... 67 2.4.3 ACLED ............................................................................................................................................... 67 2.4.4 i-Casualty ............................................................................................................................................ 68 2.4.5 Syrian Revolution Martyr Database .................................................................................................... 68 2.4.6 Iraq Body Count .................................................................................................................................