How deep are the economic scars of war? And why do some regions recover from violent conflict more slowly than others? In this blog post, Stefan Nikolić of Loughborough University introduces his latest article for the Journal of Regional Science, co-authored with Aleksandar Kešeljević and Rok Spurk, entitled ‘Ethnic Conflicts, Civil War, and Economic Growth: Region-Level Evidence From Former Yugoslavia‘.
The breakup of Yugoslavia in the 1990s led to devastating ethnic conflict and civil war. It also offers an important historical case for studying how war affects regional development. Rather than treating war as a uniform national shock, our paper examines how conflict shaped regional economic growth. Looking below the national level reveals how war can produce uneven development trajectories that persist long after the violence has ended.
We analyse GDP per person for 78 regions across five former Yugoslav republics, covering the period from 1950 to 2015. This long time span makes it possible to trace regional economic trajectories both before the war and decades after it. To estimate what these regional economies might have looked like in the absence of war, we compare them with similar regions in 32 countries that did not experience armed conflict.
We find three main results. First, the Yugoslav civil war caused extremely large and lasting economic losses (Figure 1). On average, GDP per person in affected regions was 38% lower than it would likely have been without the war. In the hardest-hit regions, the losses reached as much as 79%. Even by 2015, there is no clear evidence of long-run recovery.
Figure 1: Long-term effect of Yugoslav civil war on economic growth across full treatment sample, 1950–2015
Second, the effects varied sharply across regions. North-western regions, closer to Western European markets, experienced smaller and more temporary losses (Figure 2). By contrast, many south-eastern regions, especially in present-day Bosnia-Herzegovina, Serbia, and North Macedonia, suffered much deeper and more lasting economic decline (Figure 3). Capital city regions were also generally more resilient than surrounding areas.
Figure 2: Long-term effect of Yugoslav civil war on economic growth trajectories of Slovenian regions, 1950–2015
Figure 3: Long-term effect of Yugoslav civil war on economic growth trajectories of regions within former Yugoslav republics, 1950–2015
Third, the paper helps explain why these regional differences emerged. Larger GDP losses were associated with population displacement, ethnic division, and greater distance from Western Europe. These mechanisms connect wartime violence to the disruption of local labour markets, the breakdown of interethnic economic ties, and the weakening of access to external markets. The contribution of the paper, then, is not only to show that war harms growth, but also to identify some of the factors that help explain why some regions recovered more successfully than others.
The former Yugoslav case offers a powerful example of how ethnic conflict and civil war can inhibit regional economic growth for decades. This remains highly relevant today as many parts of the world continue to experience armed conflict. Understanding these legacies matters not only for interpreting the region’s economic geography, but also for thinking more broadly about how war reshapes regional development over the long run.