Three Essays on the Economic Effects of Violent Conflicts and Culture

Chapters 1 and 2 of my thesis deal with long-term economic effects of violent conflicts. In the first chapter, I use World War II casualties suffered in Austrian municipalities as a natural experiment for human casualties and find a significant negative causal effect of human losses on economic activity today. As I demonstrate, the likely channel through which the effect persisted over time is through its impact on the structural composition of the work force. Specifically, greater human losses increased the fraction of employment in manufacturing at the expense of agriculture until the 1970s and services from then onwards. A simple model shows that structural change can translate a lower labor share in agricultural production into less participation of service sector growth at a later time. In the next chapter, I identify a channel through which the disadvantage of displacement during a violent conflict might be carried over to the next generation. In particular, I show that displaced parents spend significantly less on the education of their children years later. A decomposition of the causal effect shows that differences in income and the stock of durable goods can at most explain one third of the finding. Some evidence points towards increased uncertainty about the future of displaced parents and hence reduced spending on non-vital expenditure positions. The final chaper revisits the paper by Algan & Cahuc (AER, 2010) in which they find that inherited trust has a large impact on GDP per capita. First, I show that the estimates presented in Algan & Cahuc might be biased due to a difference between the lag structure of inherited trust and initial income in their econometric specification. Next, I focus on their robustness checks, where I replicate their results and document that most of their robustness checks fail when a programming error and data problems are corrected. I conclude that their results should be considered with great care.