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Abstract
An increasing body of research has recently focused on economic strategies for sustaining peace in post-conflict societies. One strand of this literature investigates the nexus between peace and economic growth. However, economic contributions of peace to the economic recovery in a post-conflict society have not been explicitly emphasised in the current debate. Furthermore, the empirical measurement of peace remains contentious due to its theoretical underpinnings, which stem from the definition of peace which refers to the ‘absence of personal and structural violence’. This engenders two continua in the definition of peace – negative peace (i.e. ‘absence of personal violence’) and positive peace (i.e. ‘absence of structural violence’). A definition of this kind partially measures peace if one evaluates only one continuum. There is scope for an alternative. The legitimate peace measured by a peace perception index or PPI offers such an alternative. This thesis investigates the economic contributions of peace to the recovery in a post-conflict economy based on the PPI, with particular reference to the Solomon Islands. It explores the role of peace on the recovery in the economy and examines the extent to which this recovery helps to sustain peace in the long-term.
Two theoretical frameworks were employed to empirically evaluate peace. Firstly, at a microeconomic level, a partial equilibrium framework, using household level data, was employed to analyse the impact of peace on (household) income. The findings showed that a one percent improvement in the level of peace associates with a 1.4 percent increase in (household) income. The result also finds that peace transmits to income both directly and indirectly, with the latter coming through foreign and domestic investments. Secondly, at the macroeconomic level, a computable general equilibrium (CGE) framework was applied to analyse the impact of peace on the economy. Simulation results reveal that in the short-run, peace contributed 1.7 percent to GDP and the trade balance, and 2.6 percent to employment. The majority of other sectors of the economy also experienced increases. The CGE simulation also shows that the boost to the economy through the recovery in the private sector improves peace by 1.3 percent. Therefore, this thesis argues that peace is necessary for the growth of enterprises; at the same time improvement in the economy is important for the long-term sustainability of peace – thus the thesis is that there is a strong nexus between peace and economic growth.