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Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia

  • Angrist, Joshua

    ()

    (MIT)

  • Kugler, Adriana

    ()

    (Georgetown University)

Natural and agricultural resources for which there is a substantial black market, such as coca, opium, and diamonds, appear especially likely to be exploited by the parties to a civil conflict. Even legally traded commodities such as oil and timber have been linked to civil war. On the other hand, these resources may also provide one of the few reliable sources of income in the countryside. In this paper, we study the economic and social consequences of a major exogenous shift in the production of one such resource – coca paste – into Colombia, where most coca leaf is now harvested. Our analysis shows that this shift generated only modest economic gains in rural areas, primarily in the form of increased self-employment earnings and increased labor supply by teenage boys. The results also suggest that the rural areas which saw accelerated coca production subsequently became more violent, while urban areas were affected little. The acceleration in violence is greater in departments (provinces) where there was a pre-coca guerilla presence. Taken together, these findings are consistent with the view that the Colombian civil conflict is fueled by the financial opportunities that coca provides, and that the consequent rent-seeking activity by combatants limits the economic gains from coca cultivation.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2790.

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Length: 60 pages
Date of creation: May 2007
Date of revision:
Publication status: published in: Review of Economics and Statistics, 2008, 90 (2), 191-215
Handle: RePEc:iza:izadps:dp2790
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  1. Jeffrey D. Sachs & Andrew M. Warner, 1995. "Natural Resource Abundance and Economic Growth," NBER Working Papers 5398, National Bureau of Economic Research, Inc.
  2. Joshua D. Angrist & Adriana Kugler, 2005. "Rural Windfall or a New Resource Curse? Coca, Income, and Civil Conflict in Colombia," NBER Working Papers 11219, National Bureau of Economic Research, Inc.
  3. Kugler, Adriana D., 2005. "Wage-shifting effects of severance payments savings accounts in Colombia," Journal of Public Economics, Elsevier, vol. 89(2-3), pages 487-500, February.
  4. Alberto Abadie, 2004. "Poverty, Political Freedom, and the Roots of Terrorism," NBER Working Papers 10859, National Bureau of Economic Research, Inc.
  5. Collier, Paul & Hoeffler, Anke & Soderbom, Mans, 2001. "On the duration of civil war," Policy Research Working Paper Series 2681, The World Bank.
  6. Marcela Eslava & John Haltiwanger & Adriana Kugler & Maurice Kugler, 2004. "The Effect of Structural Reforms on Productivity and Profitability Enhancing Reallocation: Evidence from Colombia," NBER Working Papers 10367, National Bureau of Economic Research, Inc.
  7. Paul Collier & Anke Hoeffler, 2004. "Greed and grievance in civil war," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 563-595, October.
  8. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse; An Illustration From Nigeria," IMF Working Papers 03/139, International Monetary Fund.
  9. Dan Black & Kermit Daniel & Seth Sanders, 2002. "The Impact of Economic Conditions on Participation in Disability Programs: Evidence from the Coal Boom and Bust," American Economic Review, American Economic Association, vol. 92(1), pages 27-50, March.
  10. Massimo Guidolin & Eliana La Ferrara, 2006. "Diamonds are forever, wars are not. Is conflict bad for private firms?," Working Papers 2005-004, Federal Reserve Bank of St. Louis.
  11. Adriana Kugler & Maurice Kugler, 2003. "The labor market effects of payroll taxes in a middle-income country: Evidence from Colombia," Economics Working Papers 721, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Halvor Mehlum & Karl Moene & Ragnar Torvik, 2004. "Institutions and the Resource Curse," DEGIT Conference Papers c009_012, DEGIT, Dynamics, Economic Growth, and International Trade.
  13. Herschel I. Grossman & Daniel Mejia, 2005. "The War Against Drug Producers," NBER Working Papers 11141, National Bureau of Economic Research, Inc.
  14. Ana MaríaDíaz & FabioSánchez, 2004. "A Geography Of Illicit Crops (Coca Leaf) And Armed Conflict In Colombia," DOCUMENTOS CEDE 001918, UNIVERSIDAD DE LOS ANDES-CEDE.
  15. Alan B. Krueger & Jitka Maleckova, 2002. "Education, Poverty, Political Violence and Terrorism: Is There a Causal Connection?," NBER Working Papers 9074, National Bureau of Economic Research, Inc.
  16. Steiner, Roberto, 1998. "Colombia's income from the drug trade," World Development, Elsevier, vol. 26(6), pages 1013-1031, June.
  17. Mauricio CARDENAS SANTAMARIA, 2002. "Economic growth in Colombia: A reversal of Fortune," ARCHIVOS DE ECONOMÍA 002402, DEPARTAMENTO NACIONAL DE PLANEACIÓN.
  18. Ricardo Hausmann & Roberto Rigobon, 2003. "An Alternative Interpretation of the 'Resource Curse': Theory and Policy Implications," NBER Working Papers 9424, National Bureau of Economic Research, Inc.
  19. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September.
  20. Carrington, William J, 1996. "The Alaskan Labor Market during the Pipeline Era," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 186-218, February.
  21. Jairo Núñez & Fabio Sánchez Torres, 2000. "Geography and Economic Development in Colombia: A Municipal Approach," Research Department Publications 3107, Inter-American Development Bank, Research Department.
  22. Gaviria, Alejandro, 2000. "Increasing returns and the evolution of violent crime: the case of Colombia," Journal of Development Economics, Elsevier, vol. 61(1), pages 1-25, February.
  23. Edmonds, Eric V & Pavcnik, Nina, 2004. "International Trade and Child Labour: Cross-Country Evidence," CEPR Discussion Papers 4309, C.E.P.R. Discussion Papers.
  24. Dan Black & Terra McKinnish & Seth Sanders, 2005. "The Economic Impact Of The Coal Boom And Bust," Economic Journal, Royal Economic Society, vol. 115(503), pages 449-476, 04.
  25. Edward Miguel & Shanker Satyanath & Ernest Sergenti, 2004. "Economic Shocks and Civil Conflict: An Instrumental Variables Approach," Journal of Political Economy, University of Chicago Press, vol. 112(4), pages 725-753, August.
  26. James D. Fearon, 2004. "Why Do Some Civil Wars Last So Much Longer than Others?," Journal of Peace Research, Peace Research Institute Oslo, vol. 41(3), pages 275-301, May.
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