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Business as Unusual. An Explanation of the Increase of Private Economic Activity in High-Conflict Areas in Afghanistan

Author

Listed:
  • Tommaso Ciarli
  • Chiara Kofol
  • Carlo Menon

Abstract

In this paper we use a unique dataset that combines spatial detailed information on conflict events and on households' activity, to show a positive and significant correlation between violent conflict and entrepreneurship in Afghanistan. We build spatial and IV identifications to estimate the effect of different measures of conflict on the investment in a range of private economic activities of nearby households. The results consistently show that the level of conflict, its impact, and to a lesser extent its frequency, increase the probability that a household engages in self-employment activities with lower capital intensity and in activities related to subsistence agriculture, and reduce the probability of investing in higher capital self-employment. Overall, by increasing entrepreneurship, conflict pushes the country towards a regressive structural change. However, the magnitude of most of the effects is quite small. The paper contributes to a literature that, due to data constraints and identification issues, has not yet delivered conclusive evidence.

Suggested Citation

  • Tommaso Ciarli & Chiara Kofol & Carlo Menon, 2015. "Business as Unusual. An Explanation of the Increase of Private Economic Activity in High-Conflict Areas in Afghanistan," SERC Discussion Papers 0182, Spatial Economics Research Centre, LSE.
  • Handle: RePEc:cep:sercdp:0182
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    More about this item

    Keywords

    Violent conflict; entrepreneurship; development;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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