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

This paper contributes to a literature that due to data constraints and identification issues has not yet delivered conclusive evidence

Abstract

In this paper the authors 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.

The authors 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.

This research was funded under the Private Enterprise Development in Low-Income Countries (PEDL) Programme

Citation

Ciarli, T., Kofol, C., Menon, C. Business as Unusual. An Explanation of the Increase of Private Economic Activity in High-Conflict Areas in Afghanistan (2015) 59 pp

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

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