Business as unusual. An explanation of the increase of private economic activity in high-conflict areas in Afghanistan

Ciarli, Tommaso, Kofol, Chiara and Menon, Carlo (2015) Business as unusual. An explanation of the increase of private economic activity in high-conflict areas in Afghanistan. Working Paper. SERC, LSE, London.

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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.

Item Type: Reports and working papers (Working Paper)
Schools and Departments: School of Business, Management and Economics > SPRU - Science Policy Research Unit
Subjects: H Social Sciences > HD Industries. Land use. Labour > HD0072 Economic development. Development economics. Economic growth
J Political Science > JZ International relations > JZ6385 The armed conflict. War and order
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Depositing User: Tommaso Ciarli
Date Deposited: 16 Oct 2015 08:29
Last Modified: 16 Oct 2015 08:29
URI: http://sro.sussex.ac.uk/id/eprint/57169

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