Abstract
The risk of war tends to be very high in the first few years that follow the end of a previous conflict. This paper is concerned with the potential contribution of fiscal policy to post-conflict peace stabilization. Drawing on a simple theoretical representation of the post-conflict interaction between two contending parties, the paper explores the empirical relationship between public consumption, fiscal balances, and the risk of war in a sample of African economies. Results suggest that higher government consumption is associated with a higher risk of returning to war. A possible interpretation of this finding is that by increasing the share of public investment today, governments increase the future value of the peace dividend. The benefits of this investment will be enjoyed by all parties only to the extent that peace persists. Therefore, a higher share of public investment increases parties' incentive to maintain peace.
Published Version
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