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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, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:sercdp:0182
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    Cited by:

    1. 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.
    2. Disli, Mustafa & Jalaly, Shakir, 2024. "The performance of Islamic and conventional microfinance loans in Afghanistan: The Taliban and beyond," Emerging Markets Review, Elsevier, vol. 59(C).
    3. Mr. Philip Barrett, 2018. "The Fiscal Cost of Conflict: Evidence from Afghanistan 2005-2016," IMF Working Papers 2018/204, International Monetary Fund.
    4. Arzu Kibris & Phillip Nelson, 2022. "Individual exposure to armed conflict and entrepreneurship," HiCN Working Papers 365, Households in Conflict Network.
    5. 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.
    6. Kofol, Chiara & Ciarli, Tommaso, 2017. "Child Labor and Conflict: Evidence from Afghanistan," Discussion Papers 260275, University of Bonn, Center for Development Research (ZEF).

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    More about this item

    Keywords

    Violent conflict; entrepreneurship; development;
    All these keywords.

    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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