IDEAS home Printed from https://ideas.repec.org/a/vrs/izajdm/v12y2021i1p23n11.html
   My bibliography  Save this article

Conflict and the composition of economic activity in Afghanistan

Author

Listed:
  • Galdo Virgilio
  • Acevedo Gladys Lopez
  • Rama Martin

    (All author are with The World Bank.)

Abstract

Despite informality being the norm in conflict-affected countries, most estimates of the impact of conflict on economic activity rely on formal sector data. Using high-frequency data from Afghanistan, this paper assesses how surges in conflict intensity affect not only the formal sector, but also informal and illicit activities. Nighttime light provides a proxy for aggregate economic activity, mobile phone traffic by registered firms captures fluctuations in formal sector output, and the land surface devoted to poppy cultivation gives a measure of illicit production. The unit of observation is the district and the period of reference is 2012–2016. The results show that an increase in conflict-related casualties has a strong negative impact on formal economic activity in the following quarter and a positive effect on illicit activity after two quarters. The impact on aggregate economic activity is negative, but more muted.

Suggested Citation

  • Galdo Virgilio & Acevedo Gladys Lopez & Rama Martin, 2021. "Conflict and the composition of economic activity in Afghanistan," IZA Journal of Development and Migration, Sciendo & Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 12(1), pages 1-23, January.
    • Handle: RePEc:vrs:izajdm:v:12:y:2021:i:1:p:23:n:11
    DOI: 10.2478/izajodm-2021-0010
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/izajodm-2021-0010
    Download Restriction: no
    File URL: https://libkey.io/10.2478/izajodm-2021-0010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Daron Acemoglu & Tarek A. Hassan & James A. Robinson, 2011. "Social Structure and Development: A Legacy of the Holocaust in Russia," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(2), pages 895-946.
    2. Timothy Besley & Hannes Mueller, 2012. "Estimating the Peace Dividend: The Impact of Violence on House Prices in Northern Ireland," American Economic Review, American Economic Association, vol. 102(2), pages 810-833, April.
    3. Samuel Bazzi & Robert A. Blair & Christopher Blattman & Oeindrila Dube & Matthew Gudgeon & Richard Peck, 2022. "The Promise and Pitfalls of Conflict Prediction: Evidence from Colombia and Indonesia," The Review of Economics and Statistics, MIT Press, vol. 104(4), pages 764-779, October.
    4. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
    5. Vincent A. Floreani & Gladys López-Acevedo & Martín Rama, 2021. "Conflict and Poverty in Afghanistan’s Transition," Journal of Development Studies, Taylor & Francis Journals, vol. 57(10), pages 1776-1790, October.
    6. Jo Thori Lind & Karl Ove Moene & Fredik Willumsen, 2014. "Opium for the Masses? Conflict-Induced Narcotics Production in Afghanistan," The Review of Economics and Statistics, MIT Press, vol. 96(5), pages 949-966, December.
    7. Dave Donaldson & Adam Storeygard, 2016. "The View from Above: Applications of Satellite Data in Economics," Journal of Economic Perspectives, American Economic Association, vol. 30(4), pages 171-198, Fall.
    8. Ciarli, Tommaso & Kofol, Chiara & Menon, Carlo, 2015. "Business as unusual. An explanation of the increase of private economic activity in high-conflict areas in Afghanistan," LSE Research Online Documents on Economics 65015, London School of Economics and Political Science, LSE Library.
    9. J. Vernon Henderson & Adam Storeygard & David N. Weil, 2012. "Measuring Economic Growth from Outer Space," American Economic Review, American Economic Association, vol. 102(2), pages 994-1028, April.
    10. Olaf J de Groot & Carlos Bozzoli & Anousheh Alamir & Tilman Brück, 2022. "The global economic burden of violent conflict," Journal of Peace Research, Peace Research Institute Oslo, vol. 59(2), pages 259-276, March.
    11. Eli Berman & Joseph Felter & Ethan Kapstein & Erin Troland, 2012. "Predation, Taxation, Investment, and Violence: Evidence from the Philippines," NBER Working Papers 18375, National Bureau of Economic Research, Inc.
    12. Singh, Prakarsh, 2011. "Impact of terrorism on investment decisions of farmers: evidence from the Punjab insurgency," MPRA Paper 33328, University Library of Munich, Germany.
    13. World Bank, 2005. "Afghanistan : State Building, Sustaining Growth, and Reducing Poverty," World Bank Publications - Books, The World Bank Group, number 7318, December.
    14. Prakarsh Singh, 2013. "Impact of Terrorism on Investment Decisions of Farmers," Journal of Conflict Resolution, Peace Science Society (International), vol. 57(1), pages 143-168, February.
    15. Christopher Blattman & Edward Miguel, 2010. "Civil War," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 3-57, March.
    16. Colier, Paul, 1999. "On the Economic Consequences of Civil War," Oxford Economic Papers, Oxford University Press, vol. 51(1), pages 168-183, January.
    17. Toomet,Ott & Blumenstock,Joshua Evan & Scherer,Thomas & Herskowitz,Sylvan Rene & Ghani,Tarek F. & Kapstein,Ethan B., 2018. "Insecurity and industrial organization : evidence from Afghanistan," Policy Research Working Paper Series 8301, The World Bank.
    18. Beyer,Robert Carl Michael & Chhabra,Esha & Galdo,Virgilio & Rama,Martin G., 2018. "Measuring districts'monthly economic activity from outer space," Policy Research Working Paper Series 8523, The World Bank.
    19. Robert Looney, 2006. "Economic Consequences of Conflict: The Rise of Iraq’s Informal Economy," Journal of Economic Issues, Taylor & Francis Journals, vol. 40(4), pages 991-1007, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Muhammad Qahraman Kakar, 2021. "Ethnic Disparities, Women Education and Empowerment in South Asia," Erudite Ph.D Dissertations, Erudite, number ph21-01 edited by Manon Domingues Dos Santos, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Barrett, Philip, 2022. "The fiscal cost of conflict: Evidence from Afghanistan 2005–2017," World Development, Elsevier, vol. 157(C).
    2. Mr. Philip Barrett, 2018. "The Fiscal Cost of Conflict: Evidence from Afghanistan 2005-2016," IMF Working Papers 2018/204, International Monetary Fund.
    3. Francesco Amodio & Michele Di Maio, "undated". "Making Do with What You Have: Conflict, Firm Performance and Input Misallocation in Palestine," Development Working Papers 379, Centro Studi Luca d'Agliano, University of Milano.
    4. Verme, Paolo & Schuettler, Kirsten, 2021. "The impact of forced displacement on host communities: A review of the empirical literature in economics," Journal of Development Economics, Elsevier, vol. 150(C).
    5. Miguel Fajardo-Steinhauser, 2023. "Peace Dividends: The Economic Effects of Colombia's Peace Agreement," Papers 2301.01843, arXiv.org.
    6. Bernal, Carolina & Prem, Mounu & Vargas, Juan F. & Ortiz, Mónica, 2024. "Peaceful entry: Entrepreneurship dynamics during Colombia’s peace agreement," Journal of Development Economics, Elsevier, vol. 166(C).
    7. Nicolás de Roux & Luis Roberto Martínez, 2021. "Forgone Investment: Civil Conflict and Agricultural Credit in Colombia," Documentos CEDE 19236, Universidad de los Andes, Facultad de Economía, CEDE.
    8. Uzoma Iloanugo & Indranil Dutta & M. Emranul Haque, 2020. "Do Amnesty Policies Reduce Conflict? Evidence from the Niger-Delta Amnesty Program," Economics Discussion Paper Series 2011, Economics, The University of Manchester.
    9. Nicolás de Roux & Luis Martínez, 2021. "Inversión Perdida: Conflicto Civil y Crédito Agrícola en Colombia," Documentos CEDE 19622, Universidad de los Andes, Facultad de Economía, CEDE.
    10. Mthuli Ncube & Basil Jones, 2014. "Working Paper 197 - Estimating the Economic Cost of Fragility in Africa," Working Paper Series 2105, African Development Bank.
    11. Beyer, Robert C.M. & Franco-Bedoya, Sebastian & Galdo, Virgilio, 2021. "Examining the economic impact of COVID-19 in India through daily electricity consumption and nighttime light intensity," World Development, Elsevier, vol. 140(C).
    12. Timothy Besley & Torsten Persson, 2011. "Pillars of Prosperity: The Political Economics of Development Clusters," Economics Books, Princeton University Press, edition 1, number 9624.
    13. John Gibson & Susan Olivia & Geua Boe‐Gibson, 2020. "Night Lights In Economics: Sources And Uses," Journal of Economic Surveys, Wiley Blackwell, vol. 34(5), pages 955-980, December.
    14. Dominic Rohner & Mathias Thoenig, 2021. "The Elusive Peace Dividend of Development Policy: From War Traps to Macro Complementarities," Annual Review of Economics, Annual Reviews, vol. 13(1), pages 111-131, August.
    15. Donna Feir & Rob Gillezeau & Maggie E. C. Jones, 2019. "The Slaughter of the Bison and Reversal of Fortunes on the Great Plains," Center for Indian Country Development series 1-2019, Federal Reserve Bank of Minneapolis.
    16. Singhal, Saurabh & Nilakantan, Rahul, 2016. "The economic effects of a counterinsurgency policy in India: A synthetic control analysis," European Journal of Political Economy, Elsevier, vol. 45(C), pages 1-17.
    17. Arias, María Alejandra & Ibáñez, Ana María & Zambrano, Andrés, 2019. "Agricultural production amid conflict: Separating the effects of conflict into shocks and uncertainty," World Development, Elsevier, vol. 119(C), pages 165-184.
    18. Beyer, Robert C.M. & Jain, Tarun & Sinha, Sonalika, 2023. "Lights out? COVID-19 containment policies and economic activity," Journal of Asian Economics, Elsevier, vol. 85(C).
    19. Syed Abul, Basher & Jobaida, Behtarin & Salim, Rashid, 2022. "Convergence across Subnational Regions of Bangladesh – What the Night Lights Data Say?," MPRA Paper 111963, University Library of Munich, Germany.
    20. Tilman Brück & Wim Naudé & Philip Verwimp, 2013. "Entrepreneurship and Violent Conflict in Developing Countries," WIDER Working Paper Series wp-2013-028, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Afghanistan; conflict; economic activity;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:izajdm:v:12:y:2021:i:1:p:23:n:11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.