PhD defence: Syed Muhammad All-e-Raza Rizvi

Three Essays on Conflict and Economic Performance in Fragile Countries

Jury

Pascale Combes Motel, Professeure, Université Clermont Auvergne
Marie-Ange Veganzones-Varoudakis, Researcher, CNRS-Université Clermont Auvergne
Ahmet Faruk Aysan, Professeur, Hamad Bin Khalifa University
Pierre-Guillaume Meon, Professeur, Université Libre de Bruxelles
Farrukh Iqbal, PhD, National Business Education Accreditation Council
Lubna Shahnaz Umer, PhD, Policy Research, Innovation, Development & Education

Abstract

The thesis consists of four chapters and a general conclusion. The first chapter provides the facts and figures to highlight the importance of studying the nexus between conflict and economic performance. It also offers a comprehensive theoretical and empirical review to identify the factors that can help mitigate conflict in fragile countries. We follow this theoretical and empirical background for the next two chapters to identify the factors affecting conflict in fragile countries.

The second chapter uses the Autoregressive Distributed Lag (ARDL) Bound Testing cointegration approach to study the long-term relationship between internal conflict, economic growth, and human development in Pakistan from 1978-to 2016. We show that education could help reduce conflict in the country by providing better opportunities and reducing radicalization. We also show a positive contribution of public order to the reduction of conflicts, which would justify the anti-terrorist policy pursued by the country. Nevertheless, it does not seem that economic reforms and income growth help to reduce internal conflicts in Pakistan. This result could illustrate a situation where economic reforms and globalization, in particular, would be perceived as a threat, and economic growth would help finance political and social unrest. Political rights and civil liberties do not seem to reduce conflict either, and periods of democratization have more often seen a resurgence of violence.

The third chapter uses fixed-effect Poisson regressions (FEPR) with robust standard errors and instrumental variables (IV) to study the economic, social, and institutional determinants of internal conflicts in 58 fragile developing countries from 2004 to 2017. Our findings state that countries with efficient judiciary and higher income have fewer violent incidents. These findings suggest that strengthening institutions, particularly the justice system, could be an effective way to reduce conflict in fragile developing countries. Our findings for income as an explanatory variable show that low income is positively associated with violence. It shows that improving general living standard appears to be a policy variable that governments could use to reduce violence in fragile developing countries. In contrast, trade reform does not seem to mitigate violence in these countries. Education and democratic institutions could also fuel conflict in some cases. These results imply that education and trade liberalization do not have the expected effects in fragile countries, which should first improve their social, economic, and institutional situation before benefiting from economic reform and education.

For fourth chapter, we use the Generalized Method of Moments (GMM) with robust standard errors to study the role of conflict, macroeconomic uncertainty, and institutions on net FDI inwards in developing countries. To investigate the impact of institutions and governance on economic performance, we used four governance variables from ICRG database and five from World Governance Indicators (WGI). We show that overall good governance has a significant positive impact on FDI, which means that FDI increases when a country improves the quality of its institutions. For the individual impact of governance variables, the coefficient value of control of corruption and law and order was higher, which shows that developing countries should take measures to reduce corruption and enhance law and order to attract FDI. Our findings reveal a significant negative impact of internal conflict on FDI. In the case of REERV, our findings support the production flexibility argument. Our results show that firms prefer investing in a country as a substitution for exports when facing exchange rate uncertainty.

Mots-clés Keywords

Conflict, Economic Growth, Human Development, Institutions, Economic Reforms, Education, Democracy, Exchange Rate Uncertainty, Foreign Direct Investment, Pakistan, Fragile Countries.