on the impact of post sharing agreements on growth in developing countries after...

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On the Impact of Post-Conflict Power

Sharing Agreements on Growth in

Developing Countries after 1989*

Syed Mansoob Murshed

International Institute of Social Studies (ISS), Erasmus University Rotterdam (EUR),

The Hague, The Netherlands and Coventry University, UK.

[email protected]

&

Muhammad Badiuzzaman

International Institute of Social Studies (ISS), Erasmus University Rotterdam (EUR),

The Hague, The Netherlands.

[email protected]

ABSTRACT

In this paper we test the impact of post-conflict power sharing arrangements, and their

implementation, on economic growth in developing countries. Our theoretical postulate is

that power sharing agreements, especially if implemented serve to alter the institutional

environment after a civil war has occurred. This may promote growth by enabling more

Schumpterian creative destruction in production, lowering social conflict and also by altering

the nature of economic institutions. In our cross-sectional empirical investigation, we utilize a

power sharing event data set (PSED), which distinguishes between power sharing pledges

and their implementation, and sub-divides power sharing into political, economic, military

and territorial types. The data covers the period from 1989 to 2006. Our results suggest that

power sharing agreements in general, particularly territorial power sharing, as well as military

power sharing, do indeed facilitate post-conflict growth.

Keywords: Civil War, Post-Conflict Power Sharing, Post-Conflict Economic Growth.

This version: 28th

June 2016

* Paper Prepared for the 24

th World Congress of the International Political Science Association in

Poznan, Poland, 23-28 July 2016, to be presented in the panel: Signalling Strangers? Power Sharing

and FDI in Post-Civil War States, convened by Caroline Hartzell.

mailto:[email protected]

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1 Introduction

The objective of this paper is to examine the effect of power sharing agreements following

the cessation of civil war on economic growth in developing countries in the post-1989

period. It is nowadays accepted that civil war and internal conflict seriously undermines

prospects for growth and poverty reduction in developing countries (see Collier et al., 2003,

for example). A related literature posits that institutional quality is central to growth prospects

in the longer term (Acemoglu, Johnson and Robinson, 2005, for example), and may be the

relevant motor driving the ‘right’ growth enhancing economic policies. Furthermore, Rodrik

(1999) argues that countries with greater social conflict (not necessarily armed conflict)

alongside weak conflict resolution mechanisms experience slower growth. Therefore, in order

to foster greater growth, poverty reduction and development, policies for both conflict

abatement and institutional improvement are imperative.

When civil wars end, it is common for the cessation of hostilities to be accompanied by a

peace treaty. Some of these peace treaties involve power sharing clauses between the

principal protagonists. Power sharing agreements, especially when properly implemented,

may enhance the durability of peace following civil war (Walter, 2002). It is a way of re-

assuring weaker parties after a conflict by signalling of inclusion; see Rothchild (2005, 2008).

It is important to note that there is a variety of power sharing agreements with potentially

differential impacts on the sustainability of peace agreements (see Hartzell and Hoddie, 2007

on the classifications). First, there are political power sharing agreements that chiefly divide

cabinet positions among erstwhile antagonists in the immediate aftermath of the peace

accord, and stipulate arrangements for elections, including guaranteed seats for erstwhile

rebels. Secondly, there may be military pacts that aim to integrate forces that fought each

other prior to the treaty. Thirdly, there may be so-called territorial pacts that bring about a

degree of decentralization and regional autonomy. Finally, power sharing may lead to

economic concessions to excluded groups.

Hoddie and Hartzell (2005) find that territorial and military power sharing arrangements

reduce the risk of peace treaty failure by 99% and 95% respectively. Jarstad and Nilsson

(2008) conclude that military and territorial (autonomy) power sharing pacts are more likely

to contribute towards the longevity of a peace accord compared to political power sharing, as

the former two constitute a more costly signal to renege upon. They distinguish between

promises of power sharing and their actual post-accord implementation. Ottmann and Vüllers

(2015) have developed a power sharing data base (the power-sharing event dataset or PSED)

with information on the four types of power sharing promises, their implementation and

whether conflict dyads revert to violence after a power sharing deal from 1989-2006. We

utilize this data set in our paper. Ottmann and Vüllers (2015) find that the implementation of

power sharing assurances in the military and economic spheres exerts a significant effect in

lowering the risk of conflict.

Our concern in this paper is with growth in a post-conflict setting, specifically how these

growth prospects are influenced by different power sharing agreements (political, military

and territorial), and their actual implementation. We focus on a cross-section of developing

countries where civil war ceased in the 1989-2006 period matching periodicity of the power

sharing event dataset (PSED) created by Otmann and Vüllers (2015). Koubi (2005)

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demonstrated that in the 1960-1989 period, post-war economic growth was greater the higher

the intensity of conflict. Thus, there is a priori evidence that the cessation of conflict is

followed by rapid growth (the Phoenix factor).1 Furthermore, conflict may serve to remove or

reform certain institutional constraints to capitalism’s creative forces of destruction and

creation (Schumpeter, 1942). Power sharing agreements may aid or retard these changes, as

well as alter the functioning of economic institutions that promote growth as highlighted by

Acemoglu, Johnson and Robinson (2005). Moreover, power sharing may be an additional

means of mitigating social conflict in general, constituting a powerful mechanism through

which conflict resolution can take place.

The remainder of the paper is organised as follows: section 2 outlines our theoretical

framework; section 3 describes our empirical methodology and data followed by our results

in section 4; section 5 is by way of a brief conclusion.

2 Theoretical Underpinnings

As already indicated, there appears to be a ‘Phoenix’ factor at work when it comes to post-

war economic growth. Koubi (2005) has demonstrated that post-conflict growth is greater the

longer the duration of the war, and the more intense the conflict in terms of battle deaths in a

cross-country regression covering all (interstate and civil) wars during the period between

1960 and 1989. But the causal mechanisms underlying this phenomenon still remain largely

unanswered. A clue could be contained in institutional change, as war alters the balance of

power in society, even when its cessation is not accompanied by an explicit peace treaty with

power sharing stipulations. Power sharing outcomes could imply deeper institutional change

both in terms of process and outcome compared to a peace which does not result in power

sharing. De facto power sharing does not necessarily require an explicit treaty obligation.

In the economics of growth, following the work of Acemoglu, Johnson and Robinson (2005

for example) it is currently believed that long-term growth prospects require solid

institutional functioning.2 Formal and informal political institutions related to power relations

and the distribution of income shape economic institutions (chiefly related to property rights

and the enforcement of contracts). These economic institutions, and their functioning,

determine long-term growth. In other words, political institutions and the distribution of

income or wealth are the two state variables that determine economic institutions, and then

economic performance (growth) and the future distribution of resources (income and wealth).

Even if one does subscribe entirely to this view, at the very least it can be argued that

institutions perform an enabling function that permits growth enhancing economic policies to

succeed. Institutions may be a mechanism in the middle between policies to promote

investment and productivity and their fruition.

In this connection it may be argued that power sharing alters the political balance of power,

and therefore impacts also on economic institutions. Power sharing, relative to other peace

1 War, however, has serious repercussions for contemporaneous growth (Gates et. Al, 2012), and even rapid

post-conflict growth does not always make up for this lost output. 2 These views are, for example, used to explain why colonised countries in Latin America or sub-Saharan Africa

did not develop or grow as fast as North America, where settlement by colonists was more prevalent.

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settlements, leads to greater institutional change, as it is potentially more inclusive, and

usually co-opts weaker parties to a conflict.

Another factor that is considered salient in lowering growth is social conflict, short of war,

although social conflict may contain the seeds of deadly armed conflict. Rodrik (1999)

argued that social conflict measured by indicators such as income inequality3 and ethno-

linguistic fragmentation, unless moderated by well-functioning institutions (democracy and

other governance indicators), can lead to declining growth. This helps explain the growth

collapses in sub-Saharan Africa, Latin America and even the Middle East in the post-1973

era running up to the second millennium. In other words, persistent inequality and other

forms of social conflict destabilise the fabric of the social contract. Even in cases where it

does not lead to a full-blown civil war, social conflict is likely to retard growth. Post-war

power sharing arrangements may therefore constitute an additional institutional mechanism,

on top of democracy, and conventional good governance, for managing latent social conflict,

as they imply inclusiveness. This may promote sustainable economic growth.

War alters the political balance of power, and the institutions that govern society. In a market

(capitalist) economy the process of innovation is a dynamic factor crucial to economic

progress. This is a process that can be traced back to Schumpeter’s (1942) notion of creative

destruction, which implies the abandoning of some of the existing productive capacity of an

economy in favour of newer forms of production. Here the role of the entrepreneur is crucial,

as are the incentives he faces to innovate. Cabellero and Hammour (2001) present a

contemporary version of Schumpeter’s (1942) creative destruction theory involving a three

stage process: destruction or the scrapping of some existing productive capacity, the creation

of new production facilities and finally, the act of production itself. The full potential

economic growth of an economy may not be realised if there is insufficient ‘creation’. This

may be the consequence of institutional arrangements that encourage incomplete contracting,

rent seeking and the creation of regulatory burdens repressing creative innovation. Murphy,

Shleifer and Vishny (1991) point out that a certain type of institutional environment diverts

valuable human talent away from productive activities towards rent seeking and predation,

thus dampening growth prospects. The alteration or modification of institutional

arrangements that discourage innovation and create incentives to engage in rent seeking may

require the sea changes engendered by war; these may be further cemented by the power

sharing arrangements enacted in a post-conflict society.

In summary, our hypothesis is that power sharing agreements in a peace treaty after war alters

the political balance of power which reshapes economic institutions, mitigates the effects of

social conflict, and permits greater productive innovation (creative destruction). All of this

should stimulate economic growth, and this is the proposition that we empirically examine.

Prior to moving on to our econometric investigation it is worthwhile examining some

descriptive statistics. Table 1 lists the total number of post-conflict countries, a sub-set of

which had power sharing peace treaties, with a further sub-set where these agreements were

implemented.4

3 In recent times, the role of inequality in retarding growth, in both developed and developing countries, is

receiving special attention; see Dabla-Norris et al (2015). 4 According to the PSED data base, de facto implementation could exceed de jure agreement, so we recode

countries with agreements to reflect this.

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Table 1: Distribution of countries by type of political power sharing agreement and implementation

Type of Agreement Agreement Implementation

N % N %

Political power sharing agreement 21 39.62 18 33.96

Military power sharing agreement 25 47.17 21 39.62

Economic power sharing agreement 6 11.32 3 5.66

Territorial power sharing agreement 19 35.85 12 22.64

Any power sharing agreement 36 67.92 29 54.74

Total post-conflict countries 53 53 53 53

Source: PSED data base.

Table 2: Economic performance by status of power sharing agreement

Variable All Post-Conflict

Countries

Countries with

Power sharing

agreement

Countries with

implementation

5 Year annual average post power sharing agreement

Growth of GDP per capita (%) 2.9 (4.926)

N= 51

3.70 (5.624)

N=34

3.88 (6.083)

N=28

Trade openness (Exports and imports

as % GDP)

78.3(49.587)

N= 52

81.05 (51.774)

N=35

83.71 (54.172)

N=29

Investment (Gross fixed capital

formation as % of GDP)

21.94 (18.405)

N=51

23.42 (21.601)

N=35

24.50 (23.514)

N=29

10 Year annual average post power sharing agreement

Growth of GDP per capita (%) 2.75 (3.040)

N=51

3.33 (3.288)

N= 34

3.45 (3.486)

N=28

Trade openness (Total export and

import as % GDP)

75.72 (42.208)

N= 52

76.61 (42.268)

N= 35

78.32 (44.048)

N= 29

Investment (Gross fixed capital

formation as % of GDP)

19.50 (5.349)

N= 50

19.53 (5.405)

N= 35

19.60 (5.419)

N=29

Other control variables

Initial GDP per capita (2005 constant

US$)

1509 (1813.225)

N= 51

1169 (1479.074)

N=34

1214 (1568.254)

N=28

Initial human capital (mean years of

schooling for population of 15 years

and above)

5.02 (2.426)

N= 42

4.57 (2.600)

N=27

4.54 (2.478)

N=21

Source: World Development Indicators. Standard Errors in parentheses.

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Table 2 shows growth rates for a five year or ten year period after the end of conflict for all

post-conflict countries in our sample, growth rates for a five year or ten year period for those

with a power sharing agreement, and the same values for countries with an implemented

power sharing agreement. Power sharing agreements appear to enhance growth, especially

when implemented. Furthermore, other economic indicators such as investment and the

degree of openness to international trade are superior in post-conflict countries with power

sharing agreements. When we turn to the effect of the various types of power sharing in table

3, implemented territorial and military power sharing pacts respectively yield the highest

growth rates for the next 5 or 10 years, with implemented political power sharing being least

propitious for future growth. This is parallel to the findings of Jarstad and Nilsson (2008),

and their argument that political power sharing is the least costly arrangement to renege on,

compared to territorial or regional autonomy. The promise of power sharing, however, yields

substantial growth dividends.

Table 3: Growth of GDP per capita (%) under various power sharing agreement and implementation

Power sharing indicator Growth of GDP per capita (%)

5 year average 10 year average

Political power sharing agreement (Yes=1) 3.87 (7.095736)

N=20

3.19 (3.991672)

N=20

Implementation of political power sharing

agreement (Yes=1)

3.99 (7.672325)

N=17

2.99 (4.271654)

N=17

Military power sharing agreement 3.62 (6.224659)

N=24

3.41 (3.577143)

N=24

Implementation of military power sharing

agreement (Yes=1)

4.08 (6.743904)

N=20

3.77 (3.810969)

N=20

Economic power sharing agreement 2.27 (1.228833)

N=5

3.38 (0.9101264)

N=5

Implementation of economic power sharing

agreement (Yes=1)

3.10 (0.0282843)

N=2

3.16 (0.1343503)

N=2

Territorial power sharing agreement 4.21 (7.461342)

N=17

3.79 (4.31204)

N=17

Implementation of territorial power sharing

agreement (Yes=1)

5.33 (9.059533)

N=11

4.72 (5.000586)

N=11

Any political power sharing agreement

(Yes=1)

3.70 (5.624558)

N=34

3.33 (3.288037)

N=34

Implementation of any political power

sharing agreement (Yes=1)

3.88 (6.083282)

N=28

3.45 (3.485831)

N=28

Source: World Development Indicators, World Bank, and the PSED data base. Standard errors in

parenthesis.

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3. Data and Methodology

The total number of countries that successfully ended all civil wars in their soil, without

conflict re-igniting is 53. The data on power sharing is derived from the PSED data set

created by Otmann and Vüllers (2015) for the period 1989 to 2006. There are a total of 36

countries5 which had power sharing agreements, although countries actually implementing

these may exceed the number of explicit agreements enshrined in treaties. Political power

sharing agreements covered 21 countries, military agreements 25 countries, economic power

sharing occurred in 6 countries and territorial agreements in 19 nations. Observe that any

single civil war cessation may involving a peace treaty may or may not contain explicit

power sharing clauses; if they do, they may cover more than one of the four dimensions of

power sharing. Details of the four different types of power sharing agreements can be found

in Ottmann and Vüllers (2015). In our econometric analysis, we exclude a number of

developed countries such as the UK and Australia as their growth trajectories are very

different from the rest of the sample, and countries where there have been power sharing

agreements in some civil wars but other armed conflicts persist (Israel, Pakistan, Peru, Sri

Lanka, Uzbekistan and Yemen). A few other countries may fall out of the sample because of

the lack of some economic data.

Our regression model involves a cross section of developing countries where civil wars ended

between 1989 to 2006, conforming to the period covered in the PSED data set. Our

dependent variable is annual average growth in GDP per-capita in the post-conflict country

for either a five or ten year period following the cessation of hostilities. Given differential

dates when power sharing agreements are arrived at, and the subsequent five or ten year

period’s average growth for different countries---our analysis is purely cross-sectional, and

not a panel. The basis regression model takes the form:

𝑌𝑖 = 𝛼 + 𝛽𝑋𝑖 + 𝛾𝑍𝑖 + 𝜖𝑖

Here Y is the dependent variable indicating the (five or ten year) annual average growth in

per-capita GDP in country i after the cessation of war6, α is the constant term, the βs are

coefficients, ε is the error term, X refers to power sharing agreements, which take the value 1

if a conflict ends with power sharing, 0 otherwise; Z is a vector of control variables described

below. We also employ country fixed effects to account for unobserved country

heterogeneities.

As far as the control variables are concerned, first of all we employ initial year GDP per

capita, as in standard growth regressions, for each country in the year when civil wars end.

This is because in a cross-section countries with a higher initial per-capita income are

expected to grow more slowly. Data on income per capita are drawn from the World Bank’s,

World Development Indicators (WDI) data base. We also include the five or ten year average

degree of trade openness (exports plus imports over GDP), as greater exposure to

international trade or globalisation is expected to increase growth prospects. Data on these

variables are drawn from the WDI. We also include five or ten year average data on gross

5 The actual data is reported on the basis of conflict dyads as there may be more than one civil war in any one

country, but for the purposes of measuring growth, we have converted the data into a country-year format. 6 Since we look at growth after the end of conflict, we avoid potential endogeneity and reversal causality issues.

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fixed capital formation as the standard proxy for investment in physical capital, essential to

any growth accounting exercise. This information is also obtained from the WDI. Data on

education or human capital are drawn from the Barro-Lee (2013) data, based on the initial

year (end of the civil war) mean years of schooling for the population aged 15 years or more.

Human capital plays a crucial role in promoting growth; since it takes time to yield dividends

in terms of growth, initial year values should be considered. The deployment of human

capital results in several countries dropping out from the sample because of missing data. We

do not include any other institutional variables involving polity and governance, as they could

be highly co-linear with power sharing, and act as confounding factors with both power

sharing and growth. In what follows we also refrain from the regression analysis involving

economic power sharing, since the number of observations are limited to just 6.

4 Empirical results

Our sample consists of 50 plus conflict countries where conflict completely ceased in the

1989-2006 period, a sub-set of which have power sharing arrangements of different types.

We refer to power sharing agreements in peace treaties as promises, and their implementation

as practices, in the tables that follow. The regressions labelled number 1 in the tables include

initial human capital as defined above. Their inclusion, however, leads to a loss of 9 out of a

total of 49-50 observations due to data paucity, and therefore in order not to lose degrees of

freedom we drop this explanatory variable in regressions labelled 2. Observe, also that

because we have a pure cross-section the fixed effects estimators will cluster standard errors

at the country level, reporting identical coefficients.

At first it may be useful to aggregate all power sharing agreements together, treating them as

if they were a grand set of institutional innovations. These results are reported in table 4 for

growth in a five year period following the cessation of violence, and in table 5 for a ten year

period of growth. Any stipulation or promise of a power sharing agreement per se seems to

positively and significantly enhance growth, except when the initial human capital

endowment of countries is excluded for the five year growth exercise in table 4. The actual

practice or implementation of these agreements appears to matter less; it is significant only in

the fixed effects estimator for ten year post-conflict growth in table 5. The impact of the

power sharing on growth appears stronger for the five year period following peace, than for

the ten year period when the magnitude of its coefficient wanes, and when it is significant it

is so at a lower confidence level than in the five year post-conflict growth regressions.

The sign of the effect of initial per-capita income is negative, as expected, although

insignificant, with the exception of one instance where initial human capital is dropped in

table 4. This may be because it is picking up the contribution of human capital when that

variable is omitted. The effect of initial human capital endowment on growth is positive but

insignificant, and the coefficients are greater in the five year period relative to the ten year

episode. The effect of the degree of globalisation on growth, measured by the magnitude of

the share of international trade in national income (openness) is positive but insignificant in

all estimations. The effect of investment captured by the magnitude of gross fixed capital

formation is highly significant in the five year period following the end of war (table 4); it

continues to exert a positive influence in the ten year period, although becoming statistically

insignificant.

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Table 4: All power sharing agreements and post conflict growth over 5 years

Variables Promise Practice Promise: Fixed effect Practice: Fixed effect

1 2 1 2 1 2 1 2

Any promise 1.662** 2.369 1.662** 2.369**

(0.787) (1.502) (0.779) (1.101)

Any practice 0.986 1.876 0.986 1.876

(0.752) (1.391) (0.661) (1.169)

Trade openness 0.00326 0.0108 0.00265 0.00984 0.00326 0.0108 0.00265 0.00984

(0.00707) (0.0144) (0.00735) (0.0145) (0.00559) (0.00976) (0.00574) (0.00982)

Investment 0.0909*** 0.110* 0.0927*** 0.111* 0.0909*** 0.110*** 0.0927*** 0.111***

(0.0269) (0.0557) (0.0279) (0.0561) (0.0172) (0.0338) (0.0178) (0.0333)

Initial_Y -7.89e-05 6.49e-05 -0.000154 -1.54e-05 -7.89e-05 6.49e-05 -0.000154 -1.54e-05

(0.000219) (0.000393) (0.000222) (0.000386) (0.000150) (0.000161) (0.000178) (0.000157)

Initial_human

capital 0.175 0.160 0.175 0.160

(0.173) (0.179) (0.215) (0.227)

Constant -1.599 -1.885 -0.795 -1.161 -1.599 -1.885 -0.795 -1.161

(1.165) (1.854) (1.093) (1.682) (1.186) (1.265) (0.910) (1.125)

Observations 41 50 41 50 41 50 41 50

R-squared 0.389 0.181 0.343 0.170 0.389 0.181 0.343 0.170

Standard errors in parentheses. *** p<0.01, ** p<0.05, * p<0.1

Table 5: All power sharing agreements and post conflict growth over 10 years


1 2 1 2 1 2 1 2

Any promise 1.275* 1.663* 1.275* 1.663**

(0.685) (0.956) (0.695) (0.767)

Any practice 0.933 1.402 0.933 1.402*

(0.622) (0.867) (0.574) (0.793)

Trade openness 0.00625 0.0123 0.00523 0.0113 0.00625 0.0123 0.00523 0.0113

(0.00668) (0.00998) (0.00678) (0.0100) (0.00449) (0.00796) (0.00454) (0.00811)

Investment 0.0286 0.133 0.0256 0.137 0.0286 0.133 0.0256 0.137*

(0.0648) (0.0835) (0.0658) (0.0838) (0.0642) (0.0817) (0.0618) (0.0812)

Initial_Y -0.000120 -4.06e-05 -0.000176 -9.61e-05 -0.000120 -4.06e-05 -0.000176 -9.61e-05

(0.000185) (0.000247) (0.000183) (0.000240) (0.000207) (0.000158) (0.000222) (0.000160)

Initial_human

capital 0.125 0.121 0.125 0.121

(0.146) (0.148) (0.177) (0.187)

Constant 0.211 -1.778 0.836 -1.331 0.211 -1.778 0.836 -1.331

(1.593) (1.858) (1.516) (1.788) (1.791) (1.961) (1.539) (1.914)

Observations 40 49 40 49 40 49 40 49

R-squared 0.154 0.160 0.125 0.152 0.154 0.160 0.125 0.152


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Turning now to political power sharing, this type of power sharing is statistically insignificant

in terms of its contribution to growth, and the signs are sometimes negative, when it comes to

power sharing in practice (see tables 6 and 7). This may be due to the fact that political power

sharing is the most akin to ‘cheap talk’ when it comes to judging the commitment of the more

powerful to be more inclusive of the weaker segments of society. By the same token, it is

least costly signal, and the easiest commitment to renege on. Political power sharing, such as

guarantees of cabinet posts for erstwhile rebels, can not only be reneged on, but can also

produce political instability that is harmful to growth prospects. Roeder (2005) points out the

inherent instability of political power sharing in fractionalised societies. Hence, the negative

signs on implemented power sharing agreements, when all control variables are included.

Both Jarstad and Nilsson (2008) and Ottmann and Vüllers (2015) find that political power

sharing can actually reduce the durability of peace. In our sample, we have excluded post-

conflict countries that revert to civil war, but that the absence of war (negative peace) does

not preclude political instability and social conflict. The signs, significance and interpretation

of the contribution of the other independent variables in tables 6 and 7 are much the same as

discussed in the previous paragraph.

With regard to military power sharing’s impact on growth we can be more sanguine. Its sign

is always positive (Tables 8 and 9), becoming significant in three cases when implemented,

included two cases for long-run growth ten years after cessation of hostilities (Table 9). The

signs and significance for the other independent variables are similar to their effect

previously, with the exception that the effect of initial per-capita income is positive (but

insignificant) for the ten year growth analysis. This suggests an anomaly that for this sample,

richer post-conflict countries grow faster than poorer countries. Military power sharing could

be more effective in enhancing economic progress in post-conflict countries that were

relatively richer to begin with. In line with earlier findings (Jarstad and Nilsson, 2008 and

Ottmann and Vüllers, 2015) military power sharing is a more powerful signal of inclusion,

and lowers the probability of conflict reigniting substantially. Hence it generates more

stability, may encourage greater innovation, and is more growth promoting.

Tables 10 and 11 present results for territorial power sharing or regional autonomy, a device

which may be regarded as decentralisation, federalism, akin to the power dividing ideas in

Roeder (2005). It is statistically significant in three instances also, but the magnitude of these

significant coefficients are the largest, suggesting it may be the most effective in enhancing

growth of all three types of power sharing, at least in the short run five year period. In this

case, the signs, significance and interpretation of the contribution of the other independent

variables are similar to those discussed beforehand, except that the positive contribution of

trade openness or globalisation is statistically significant in one case for the ten year analysis

of growth. Akin to military power sharing, territorial power sharing is a costlier signal of

inclusion to renege on; once granted regional autonomy cannot be easily revoked. This may

encourage political stability, reduce social conflict and enhance innovation especially in the

shorter term following a lasting peace accord. The benefits of this form of power sharing are

significant in fewer cases in the longer run growth analysis of ten years compared to its

military power sharing counterpart. Our findings run parallel to the results in Jarstad and

Nilsson (2008) and Ottmann and Vüllers (2015), although they are concerned with durability

of peace.

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5 Conclusions

We have attempted to look at the growth enhancing properties of power sharing agreements

in post-conflict economies. Our premise is that power sharing could be the catalyst for

institutional change, permitting greater innovation and managing social conflict, so as to

enhance growth prospects. We do, indeed, find this to be the case for military and territorial

power sharing agreements, but not necessarily for political power sharing. The former two

types of power sharing constitute a stronger commitment to be inclusive to weaker parties.

Military power sharing may have more lasting positive effects on growth than territorial

autonomy. On the other hand, the latter is more akin to power dividing arrangements so as to

make power sharing more durable.

Power sharing as a means of avoiding social conflict and civil wars has its limitations (see,

Murshed, 2010, chapter 5 for a brief review of this critique). The real solution, according to

Roeder (2005) may lie in ‘power dividing’ institutions. Its characteristics include first, certain

limitations on the powers of government. Power division also means the separation of powers

between executive, legislative and judicial branches. Also, none of the different decision

making layers of government should have veto powers. This means checks and balances, and

constraints on executive power. One interpretation of the above idea is that there should be

more layers of political and economic decision making than there are ethnicities or factions

within society. This is likely to lead to more cooperative behaviour and several overlapping

coalitions between groups.

Finally, there are other concepts and typologies of power sharing; see Strøm et al (2016) and

Gates et al (2016). They divide power sharing into constraining, dispersive and inclusive

types; the latter being the most prevalent in post-conflict societies. Dispersive power sharing

is akin to territorial power sharing, and the inclusive variety is similar to political power

sharing. Constraining power sharing which is conceptually similar to a set of checks and

balances (judicial review, religious freedom) works best in lowering the probability of civil

war (Gates et. Al, 2016). It is possible that these constraining factors may promote growth as

well.

12

REFERENCES

Acemoglu, Daron, Simon Johnson, and James Robinson (2005) ‘Institutions as the

Fundamental Cause of Long-Run Growth’, in Philippe Aghion and Steven Durlauf

(eds), Handbook of Economic Growth 1(1), Amsterdam: Elsevier: 385-472.

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World, 1950-2010’, Journal of Development Economics, 104 (September): 84-198.

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Development: Institutions, Crisis and Restructuring’, in Boris Pleskovic and Nicholas

Stern (eds), Annual World Bank Conference on Development Economics, 2000,

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Sambanis (2003) Breaking the Conflict Trap: Civil War and Development Policy,

World Bank, Oxford: Oxford University Press.

Dabla-Norris, Era, Kalpana Kochkar, Nujin Suphaphiphat, Frantisek Ricka and Evridiki

Tsounta (2015) ‘Causes and Consequences of Income Inequality: A Global

Perspective’, IMF Staff Discussion Note.

Gates, Scott, Håvard Hegre, Håvard Mokleiv Nygård and Håvard Strand (2012)

‘Development Consequences of Armed Conflict’, World Development 40 (9): 1713-

1722.

Gates, Scott, Benjamin A.T. Graham, Yonatan Lupu, Kaare W Strøm and Håvard Strand

(2016) ‘Power Sharing, Protection and Peace’, Journal of Politics 78 (2): 512-526.

Hartzell, Caroline and Matthew Hoddie (2007) Crafting Peace: Power Sharing Institutions

and the Negotiated Settlement of Civil Wars, University Park: Pennsylvania State

University Press.

Hoddie, Matthew and Caroline Hartzell (2005) ‘Power Sharing in Peace Settlements:

Initiating the Transition from Civil war’, in Philip Roeder and Donald Rothchild

(eds), Sustainable Peace: Power and Democracy After Civil Wars, London: Cornell

University Press: 83-106.

Jarstad, Anna and Desirée Nilsson (2008) ‘From Words to Deeds: The Implementation of

Power-Sharing Pacts in Peace Accords’, Conflict Management and Peace Science

25(3): 206-223.

Koubi, Vally (2005) ‘War and Economic Performance’ Journal of Peace Research 42(1): 67-

82.

Murphy, Kevin, Andrei Shleifer and Robert Vishny (1991) ‘The Allocation of Talent:

Implications for Growth’, Quarterly Journal of Economics, 106 (2): 503-30.

Murshed, Syed Mansoob (2010) Explaining Civil War: A Rational Choice Approach,

Cheltenham: Edward Elgar.

Rodrik, Dani (1999) ‘Where Did All the Growth Go? External Shocks, Social Conflict, and

Growth Collapses’, Journal of Economic Growth, 4(4): 385-412.

13

Roeder, Philip (2005) ‘Power Dividing as an Alternative to Ethnic Power Sharing’ in Philip

G Roeder and Donald Rothchild (eds) Sustainable Peace. Power and Democracy after

Civil War, London: Cornell University Press: 51-82.

Rothchild, Donald (2005) ‘Reassuring Weaker Parties after Civil Wars: The Benefits and

Costs of Executive Power-sharing Systems in Africa’, Ethnopolitics, 4(3): 247-267.

Rothchild, Donald (2008). ‘Africa’s Power Sharing Institutions as a Response to Insecurity:

Assurance without Deterrence’, in Stephen M. Saideman and Marie-Joelle J. Zahar

(eds) Intra-State Conflict, Governments and Security: Dilemmas of Deterrence and

Assurance, London: Routledge: 138-160.

Otmann, Martin and Johannes Vüllers (2015) ‘The Power Sharing Event Dataset (PSED): A

New Dataset on the Promises and Practices of Power-Sharing in Post-Conflict

Countries’, Conflict Management and Peace Science, 32(3): 327-350.

Schumpeter, Joseph A (1942) Capitalism, Socialism and Democracy, New York: Harper.

Strøm, Kaare W, Scott Gates, Benjamin A.T. Graham and Håvard Strand (2016) ‘Inclusion,

Dispersion, and Constraint: Powersharing in the World’s States, 1975–

2010’, British Journal of Political Science, available on CJO2015.

doi:10.1017/S0007123415000174.

Walter, Barbara F (2002) Committing to Peace: The Successful Settlement of Civil Wars,

Princeton: University Press.

World Bank, World Development Indicators Database, Washington D.C.

14

Table 6: Political power sharing and post conflict growth over 5 years


1 2 1 2 1 2 1 2

PPS promise 0.520 1.357 0.520 1.357

(0.847) (1.446) (0.833) (1.572)

PPS practice -0.0535 1.087 -0.0535 1.087

(0.921) (1.485) (0.766) (1.739)

Trade

openness 0.00297 0.0101 0.00345 0.0104 0.00297 0.0101 0.00345 0.0104

(0.00750) (0.0147) (0.00755) (0.0147) (0.00547) (0.00920) (0.00576) (0.00961)

Investment 0.0953*** 0.116** 0.0973*** 0.113* 0.0953*** 0.116*** 0.0973*** 0.113***

(0.0284) (0.0564) (0.0290) (0.0571) (0.0170) (0.0350) (0.0191) (0.0311)

Initial_Y -0.000166 -2.03e-05 -0.000186 -6.41e-05 -0.000166 -2.03e-05 -0.000186 -6.41e-05

(0.000227) (0.000397) (0.000226) (0.000392) (0.000178) (0.000209) (0.000185) (0.000199)

Initial_human capital

0.155 0.120 0.155 0.120

(0.187) (0.192) (0.257) (0.256)

Constant -0.500 -0.751 -0.182 -0.490 -0.500 -0.751 -0.182 -0.490

(1.123) (1.648) (1.092) (1.595) (1.336) (1.283) (1.188) (1.121)

Observations 41 50 41 50 41 50 41 50

R-squared 0.318 0.153 0.311 0.146 0.318 0.153 0.311 0.146

Standard errors in parentheses *** p<0.01, ** p<0.05, * p<0.1

Table 7: Political power sharing and post conflict growth over 10 years


1 2 1 2 1 2 1 2

PPS promise 0.256 1.003 0.256 1.003

(0.763) (0.932) (0.779) (1.179)

PPS practice -0.502 0.349 -0.502 0.349

(0.747) (0.929) (0.651) (1.142)

Trade openness 0.00545 0.0116 0.00544 0.0116 0.00545 0.0116 0.00544 0.0116

(0.00699) (0.0102) (0.00695) (0.0103) (0.00444) (0.00813) (0.00441) (0.00810)

Investment 0.0294 0.162* 0.0127 0.142 0.0294 0.162 0.0127 0.142

(0.0732) (0.0877) (0.0683) (0.0865) (0.0694) (0.100) (0.0638) (0.0909)

Initial_Y -0.000198 -0.000111 -0.000211 -0.000162 -0.000198 -0.000111 -0.000211 -0.000162

(0.000190) (0.000247) (0.000187) (0.000246) (0.000229) (0.000191) (0.000230) (0.000186)

Initial_human

capital

0.101 0.0589 0.101 0.0589

(0.156) (0.157) (0.204) (0.200)

Constant 1.281 -1.424 2.075 -0.684 1.281 -1.424 2.075 -0.684

(1.805) (1.947) (1.597) (1.843) (2.093) (2.498) (1.651) (2.193)

Observations 40 49 40 49 40 49 40 49

R-squared 0.071 0.125 0.080 0.105 0.071 0.125 0.080 0.105


15

Table 8: Military power sharing and post conflict growth over 5 years


1 2 1 2 1 2 1 2

MPS promise 0.846 1.642 0.846 1.642

(0.834) (1.374) (0.644) (1.441)

MPS practice 1.177 2.244 1.177* 2.244

(0.764) (1.363) (0.623) (1.597)

Trade openness 0.00349 0.0113 0.00323 0.0102 0.00349 0.0113 0.00323 0.0102

(0.00740) (0.0146) (0.00727) (0.0144) (0.00564) (0.0106) (0.00582) (0.0107)

Investment 0.100*** 0.121** 0.103*** 0.126** 0.100*** 0.121*** 0.103*** 0.126***

(0.0282) (0.0560) (0.0278) (0.0553) (0.0196) (0.0334) (0.0188) (0.0360)

Initial_Y -0.000177 -3.58e-05 -0.000184 -7.58e-05 -0.000177 -3.58e-05 -0.000184 -7.58e-05

(0.000223) (0.000386) (0.000219) (0.000375) (0.000168) (0.000167) (0.000163) (0.000162)

Initial_human

capital

0.202 0.181 0.202 0.181

(0.195) (0.179) (0.227) (0.220)

Constant -1.100 -1.181 -1.070 -1.244 -1.100 -1.181 -1.070 -1.244

(1.337) (1.738) (1.135) (1.636) (1.136) (1.373) (0.892) (1.263)

Observations 41 50 41 50 41 50 41 50

R-squared 0.331 0.163 0.355 0.185 0.331 0.163 0.355 0.185


Table 9: Military power sharing and post conflict growth over 10 years


1 2 1 2 1 2 1 2

MPS promise 0.620 0.964 0.620 0.964

(0.710) (0.881) (0.643) (0.829)

MPS practice 0.971 1.480* 0.971* 1.480

(0.642) (0.855) (0.564) (0.899)

Trade openness (0.00694) (0.0102) (0.00678) (0.00998) (0.00456) (0.00853) (0.00477) (0.00852)

0.0233 0.125 0.0355 0.130 0.0233 0.125 0.0355 0.130

Investment (0.0672) (0.0860) (0.0664) (0.0836) (0.0657) (0.0789) (0.0642) (0.0790)

-0.000197 -0.000115 -0.000201 -0.000133 -0.000197 -0.000115 -0.000201 -0.000133

Initial_Y (0.000186) (0.000245) (0.000182) (0.000235) (0.000222) (0.000169) (0.000220) (0.000163)

0.147 0.135 0.147 0.135


(0.164) (0.150) (0.202) (0.188)

0.920 -0.831 0.677 -0.970 0.920 -0.831 0.677 -0.970

Constant (1.666) (1.764) (1.555) (1.724) (1.731) (1.775) (1.542) (1.759)

40 49 40 49 40 49 40 49

Observations 0.088 0.126 0.126 0.159 0.088 0.126 0.126 0.159


16

Table 10: Territorial power sharing and post conflict growth over 5 years


1 2 1 2 1 2 1 2

TPS promise 0.120 2.516* 0.120 2.516

(0.839) (1.418) (0.799) (1.948)

TPS practice -0.427 3.136* -0.427 3.136

(1.010) (1.611) (0.831) (2.689)

Trade

openness

0.00362 0.0141 0.00305 0.0128 0.00362 0.0141 0.00305 0.0128

(0.00766) (0.0144) (0.00754) (0.0143) (0.00578) (0.0109) (0.00570) (0.0102)

Investment 0.0971*** 0.122** 0.0979*** 0.112** 0.0971*** 0.122*** 0.0979*** 0.112***

(0.0284) (0.0549) (0.0284) (0.0547) (0.0185) (0.0331) (0.0176) (0.0251)

Initial_Y -0.000180 -4.65e-05 -0.000211 5.66e-06 -0.000180 -4.65e-05 -0.000211 5.66e-06

(0.000231) (0.000374) (0.000233) (0.000375) (0.000190) (0.000197) (0.000200) (0.000186)

Initial_human

capital

0.121 0.133 0.121 0.133

(0.183) (0.182) (0.236) (0.238)

Constant -0.254 -1.462 -0.126 -1.081 -0.254 -1.462 -0.126 -1.081

(1.076) (1.661) (1.034) (1.557) (1.108) (1.419) (1.002) (1.193)

Observations 41 50 41 50 41 50 41 50

R-squared 0.312 0.193 0.315 0.203 0.312 0.193 0.315 0.203


Table 11: Territorial power sharing and post conflict growth over 10 years


1 2 1 2 1 2 1 2

TPS promise 0.282 1.451 0.282 1.451

(0.693) (0.895) (0.631) (1.046)

TPS practice 0.748 2.165** 0.748 2.165

(0.867) (1.037) (0.623) (1.459)

Trade openness 0.00595 0.0133 0.00610 0.0130 0.00595 0.0133 0.00610 0.0130*

(0.00712) (0.0101) (0.00697) (0.00986) (0.00447) (0.00797) (0.00433) (0.00753)

Investment 0.0193 0.124 0.00286 0.0925 0.0193 0.124 0.00286 0.0925

(0.0677) (0.0843) (0.0700) (0.0852) (0.0627) (0.0748) (0.0604) (0.0668)

Initial_Y -0.000192 -0.000122 -0.000161 -6.87e-05 -0.000192 -0.000122 -0.000161 -6.87e-05

(0.000191) (0.000237) (0.000194) (0.000236) (0.000234) (0.000184) (0.000238) (0.000177)


0.0828 0.0772 0.0828 0.0772

(0.152) (0.151) (0.191) (0.194)

Constant 1.531 -0.910 1.771 -0.338 1.531 -0.910 1.771 -0.338

(1.485) (1.728) (1.459) (1.677) (1.553) (1.844) (1.475) (1.578)

Observations 40 49 40 49 40 49 40 49

R-squared 0.072 0.153 0.087 0.183 0.072 0.153 0.087 0.183


17

Annex: Countries where Conflict Ceased 1989-2006

Name of country Name of country

1. Afghanistan 44. Senegal

2. Angola 45. Serbia (Yugoslavia)

3. Bangladesh 46. Sierra Leone

4. Bosnia-Herzegovina 47. Somalia

5. Burundi 48. South Africa

6. Cambodia 49. Sudan

7. Cameroon 50. Tajikistan

8. Chad 51. Trinidad and Tobago

9. Colombia 52. Uganda

10. Comoros 53. Venezuela

11. Congo

12. Côte d'Ivoire

13. Croatia

14. Democratic Republic of Congo

15. Djibouti

16. Ecuador

17. El Salvador

18. Eritrea

19. Georgia

20. Guatemala

21. Guinea

22. Guinea Bissau

23. Haiti

24. Indonesia

25. Iran

26. Laos

27. Lesotho

28. Liberia

29. Macedonia

30. Mali

31. Mexico

32. Moldova

33. Mozambique

34. Nepal

35. Nicaragua

36. Niger

37. Nigeria

38. Panama

39. Papua-New Guinea

40. Paraguay

41. Philippines

42. Romania

43. Rwanda

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