Oiling up the field. Forced internal displacement and the expansion of palm oil in Colombia

Widespread analysis of the link between natural resources and conflicts has shown how positive income shocks in agriculture usually reduce violence (opportunity cost effect), while positive shocks in extractive commodities intensify it (rapacity/lootability effect). However, recent works have found cases where positive income shocks in agriculture lead to more violence. We examine the expansion of palm oil in Colombia to document another case where higher expected profits in agriculture led to more violence. Furthermore, we explore the institutional framework that explains the direction of this effect. Using a difference-in-difference strategy, we find that a 1 log point increase in palm oil prices raises the forced internal displacement rate in palm municipalities by 0.42 standard deviations. We show evidence supporting the hypothesis that the need for new lands explained the violence linked to the palm expansion within a framework in which weak property rights and illegal institutions were predominant. Likewise, we shed light on how the institutional framework shapes the relationship between income shocks and conflict.