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Regular article Firms amid conflict: Performance, production inputs, and market competition ☆

Summary

This article examines the effects of conflict on firms' economic performance and the underlying mechanisms. Using an original dataset of Libyan firms and geolocalized data on conflict events during the Second Libyan Civil War, the authors found that conflict reduces a firm's revenues, induces input substitution, and increases firms' exit. It also found that, conditional on survival, the negative effect of conflict on revenues is non-linear. The reduction in the availability of production inputs and the weaker market competition due to the conflict-induced decrease in the number of a firm's competitors drive this result.

Q&As

What is the effect of conflict on firms' economic performance?
The effect of conflict on firms' economic performance is a reduction in a firm's output, input substitution, and increased firms' exit.

How did the authors combine data to study this effect?
The authors combined an original dataset of Libyan firms and geolocalized data on conflict events during the Second Libyan Civil War.

What are the two mechanisms that drive the non-linear effect of conflict on revenues?
The two mechanisms that drive the non-linear effect of conflict on revenues are the heterogeneous conflict-induced reduction in the availability of production inputs and the weaker market competition due to the conflict-induced decrease in the number of a firm’s competitors.

What are the predictions of the theoretical framework developed in the study?
The predictions of the theoretical framework developed in the study are that conflict reduces a firm’s output, induces input substitution, and increases firms’ exit.

What are the findings of the empirical analysis of the study?
The findings of the empirical analysis of the study are that conflict reduces a firm’s revenues and increases exit, relatively more for firms intensive in foreign inputs, and that, conditional on survival, the negative effect of conflict on revenues is non-linear.

AI Comments

👍 This article provides a useful framework to study the effects of conflict on firms and combines an interesting dataset to provide evidence for the results.

👎 This article fails to provide a comprehensive discussion of the implications of conflict on firms, and the conclusions drawn from the data are limited.

AI Discussion

Me: It talks about the effect of conflict on firms' economic performance and the underlying mechanisms. It combines data on Libyan firms and geolocalized data on conflict events to show that conflict decreases a firm's revenues, induces input substitution, and increases exit. It also suggests that the reduction in the availability of production inputs and the weaker market competition due to the conflict-induced decrease in the number of a firm's competitors is driving this result.

Friend: Wow. That's really interesting. What are the implications of this article?

Me: Well, it shows that conflict has a negative effect on a firm's economic performance and that this effect is non-linear, with its marginal effect decreasing as conflict intensity increases. This suggests that firms need to be aware of the negative impact that conflict can have on their operations and should take steps to mitigate this impact. Additionally, it suggests that governments and international organizations should be proactive in helping to reduce the effects of conflict on firms in affected areas.

Action items

Technical terms

Regular article
A regular article is a type of scientific paper published in a journal or other academic publication. It is typically written by a researcher or group of researchers and presents the results of their research.
Journal of Development Economics
The Journal of Development Economics is a peer-reviewed academic journal that publishes research on the economics of development.
Creative Commons license
A Creative Commons license is a type of copyright license that allows the creator of a work to specify how their work can be used and shared by others.
Theoretical framework
A theoretical framework is a set of assumptions, concepts, values, and practices that define the scope of a research project and provide a structure for analyzing the results.
Data availability
Data availability is the ability of a researcher to access and use data for research purposes.
JEL classification
The JEL classification system is a system used by the Journal of Economic Literature to classify articles according to their subject matter.
Keywords
Keywords are words or phrases used to describe the content of a document or web page.
Recommended articles
Recommended articles are articles that have been recommended by a journal or other publication as being of particular interest or relevance to its readers.

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