The relationship between panel and synthetic control estimators of the effect of civil war

We examine the relationship between the case-study, synthetic control and large-N panel-data approaches using the costs of conflict as an example. In particular, we show that effects estimated from panel data models and effects estimated by the comparison of a treated case with a synthetic control are closely related. We then illustrate the similarities by studying the impact of civil war on the level and growth rate of GDP and discuss how to overcome some of the methodological challenges involved in quantifying the economic cost of war. We find that the incidence of internal conflicts has an economically significant one-off negative effect on the GDP level, as well as a negative effect on the growth rate of the GPD.