Geographical Exposure to Conflicts and Firm Performance: Evidence from The MENA Region

Résumé En

This paper assesses the impact of insecurity generated by conflicts on firm performance in theMiddle East and North Africa (MENA) region. It contributes to the literature in three ways. First,we try to identify the local effect of conflicts using a geospatial approach where we evaluate theexposure of each firm and its shipment routes and infrastructures to conflictual events overtime ina specific location. Second, from a methodological perspective, we adopt a simple methodology –new to the literature- to identify the within-firm effect. To do so, we use two series of informationon performance (measured by sales and labor productivity) on the current year t and year t-2, bothbeing reported in the same World Bank Enterprise Survey (WBES) conducted for a country in yeart. Third, large datasets from the WBES for six non-oil countries (Egypt, Jordan, Lebanon,Palestine, Tunisia and Morocco) were merged with geospatial measures to conflicts. Key findingsshow that battles and explosions negatively and robustly affect sales and productivity, all the moreso for small and mid-sized firms. Nevertheless, we do not find robust effects of exposure toprotests, riots and violence against civilians across different measures of the performance of firmsand conclude for further research on these issues.