The Economic Cost of Violent Conflicts: The Case of the Maluku Province in Indonesia

Against the background of the socio-economic and political crises of 1998–2000 in Indonesia, one of its provinces, Maluku, endured its own internal conflicts between 1999 and 2004. The coincidence of these national and regional crises—the tumult affecting Indonesia as a whole and the conflict restricted to Maluku—make the impact of local conflict on Maluku’s economy hard to identify empirically. To solve this problem, we use a synthetic control method (SCM) to construct a synthetic control unit for Maluku based on other Indonesian provinces. Our findings support the view that the violence in Maluku between 1999 and 2004 shifted the regional economy onto a lower growth path.