The Cyprus Peace Dividend Revisited is
a new effort to quantify the value of a solution of the Cyprus problem:
to the economy as a whole, to different sectors and to individuals. In
so doing, it also updates the qualitative analysis and advances earlier
efforts, by exploring new approaches and linking these to the existing
economic literature on the topic.. In the Day After series,
published between 2008 and 2010, Mullen, Antoniadou-Kyriacou and
Oğuz-Çilsal made the first substantive attempt to quantify the
commercial opportunities of a Cyprus settlement. The award-winning
three-part series included the recurring (permanent) benefits, the
combined recurring and solution-related benefits, and the benefits that
would accrue to Turkey and Greece.
Much has happened to the economic
environment since then, while subsequent natural gas finds offshore have
also changed long-term prospects. Both parts of the island were
significantly underperforming even before the recent economic
crisis. In the period 2005-12, growth in total factor productivity
(TFP)—a measure of the long-term prospects for growth—was negative in
the north and barely positive in the south. This has created risky
imbalances such as high current-account deficits and
rising debt. Moreover, low TFP growth points to a continued future of
very weak overall economic growth and high unemployment.
The dynamic impact of peace is considered
in two ways: through a "top-down" approach known as Growth Accounting
and through a bottom-up, sector-by-sector approach. In order to arrive
at the "peace dividend"—the difference between
economic activity with a solution and without a solution to the Cyprus
issue—the authors take the geometric mean of these two effectively
independent approach.