March 2020
By Jakob Rauschendorfer and Ben Shepherd
This paper examines the impact of the South Sudanese civil war on trade in East Africa. In a first step, we employ a gravity model to examine the impact of civil conflict on the trade of neighbouring countries in a general sense and conduct a counterfactual simulation for the South Sudanese case. We show that an increase in the number of violent events to 2014 levels in 2012 (the last full pre-conflict year) would have reduced exports of neighbours to South Sudan by almost 9 percent. In a second step we conduct a case study for the impact of the conflict on Uganda. Here, we take advantage of unique survey data on informal cross-border trade as well as formal customs data and exploit the spatial and time variation of the conflict for causal identification. Our first result is that while the civil war had a sizeable negative impact on both formal and informal Ugandan exports the latter was hit much harder: Our preferred estimates suggest reductions of formal exports to South Sudan and Sudan by about 12 percent while informal exports to South Sudan were reduced by close to 80 percent compared to trade flows not exposed to the conflict. Converting these losses into monetary values, these figures suggest a reduction of Uganda’s total informal exports by a staggering 25 percent, while total formal exports were reduced by about two percent as a consequence of the conflict. Our second result is that the impact of the conflict on Uganda’s formal exports is driven entirely by a reduction of industrial goods exports while exports of agricultural commodities continued to flow. Taken together our results suggest considerable heterogeneity for the impact of civil war on different types of trade.
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