Do conflicts create poverty traps? Asset losses and recovery for displaced households in Colombia

Internal conflicts entail large asset losses for certain segments in the civilian population. Asset losses may compromise the future welfare of households, thus leaving a legacy of structural poverty that is difficult to overcome. The purpose of this article is to analyze how asset losses occur during internal conflicts and the process of asset accumulation following the initial shock. To do this, we concentrate on a particularly vulnerable group of victims of war—the displaced population in Colombia. In achieving our objective, we adopt quantitative and qualitative approaches by: (i) providing a detailed description of losses stemming from forced displacement; (ii) analyzing qualitative evidence so as to understand the asset recovery processes for the displaced population; and (iii) estimating OLS, Instrumental Variable and quartile regressions in order to identify the determinants of asset losses stemming from forced displacement, and asset accumulation following the initial shock. The results indicate that recuperating asset losses or accumulating new assets is a rare event; only 25 percent of households are able to recover their original asset base, while asset ownership still seems insufficient for overcoming poverty. In addition, displaced households do not catch up even as settlement at destination sites consolidates. Therefore, unless a positive intervention is implemented, displaced households become locked in a low income trajectory, and are unlikely to leap forward to a high return asset level.