Economic Development, Political Violence and Socio-Political Instability in Colombia: An Econometric Analysis Using Panel Data

Socio-political instability is considered as an obstacle for economic and social development of countries. Therefore, Political violence as a feature of socio-political instability is a significant development constraint that generates economic problems, limits public and private investments, and damages the country’s infrastructure. This paper offers an explanation for political violence and economic development through an empirical analysis of Colombian departments that includes factors such as social conditions and narcotrafficking. We use multiple datasets to measure political violence and economic development, and we employ panel fixed-effects Driscoll and Kraay regressions and Generalized Method of Moments Estimation (GMM) for a sample of Colombian departments over the period 2000-2014. In the political violence model, we find that the aggregate-level production per capita, education, arrests and health coverage have a negative effect on political violence, whereas GINI, unemployment rate, illegal drugs and displaced population have a positive effect on violence. In the economic development model, political violence, armed actions and corruption have a negative effect on economic development, whereas population, saving, employment, political participation, manufacturing and production have a positive effect on economic development. The findings demonstrate the importance of implementing social policies and strategies against political violence to increase economic growth and development, productivity, political participation and security for the population across Colombia’s departments.