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Household investment under violence - the Colombian case

Author

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  • Grun, Rebekka E.

Abstract

Households in rural Colombia are confronted with a variety of violent threats: attacks and displacement threats by guerrillas and paramilitaries, gang violence among drug traffickers, and high common delinquency. In this context, households have to adjust their day-to-day decisions, including saving and portfolio choices, in order to be less vulnerable. The authors test the hypothesis that households, when confronted with exogenous violence, reduce their investment and, moreover, shift it from fixed to mobile assets, which would be safer in the case of displacement, and choose the opposite strategy under higher common delinquency associated with property crimes. Empirical evidence from a rich Colombian micro-data set strongly supports the hypothesis. The results shed new light on the economic impact of violence. The immediate reduction in capital stock might be much less severe than more permanent damage via the savings function. This has implications for the appropriate political answer to chronic violence in Colombia as well as in other areas of chronic conflict.

Suggested Citation

  • Grun, Rebekka E., 2008. "Household investment under violence - the Colombian case," Policy Research Working Paper Series 4713, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4713
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    Citations

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    Cited by:

    1. Nillesen, Eleonora, 2016. "Empty cups? Assessing the impact of civil war violence on coffee farming in Burundi," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 11(1), pages 1-15, March.
    2. Arias, María Alejandra & Ibáñez, Ana María & Zambrano, Andrés, 2019. "Agricultural production amid conflict: Separating the effects of conflict into shocks and uncertainty," World Development, Elsevier, vol. 119(C), pages 165-184.
    3. Maarten Voors & Eleonora Nillesen & Philip Verwimp & Erwin Bulte & Robert Lensink & Daan van Soest, 2010. "Does Conflict affect Preferences? Results from Field Experiments in Burundi," HiCN Working Papers 71, Households in Conflict Network.
    4. Alexander Cotte Poveda, 2011. "Estimando la efectividad en el control de la violencia y el desarrollo socio-económico en Colombia," Serie de Documentos en Economía y Violencia 8079, Centro de Investigaciones en Violencia, Instituciones y Desarrollo Económico (VIDE).
    5. Adriana Camacho & Catherine Rodriguez, 2013. "Firm Exit and Armed Conflict in Colombia," Journal of Conflict Resolution, Peace Science Society (International), vol. 57(1), pages 89-116, February.
    6. Philip Verwimp & Eleonora Nillesen, 2010. "A Phoenix in Flames ?Portfolio Choice and Violence in Civil War in Rural Burundi," Working Papers ECARES ECARES 2010-015, ULB -- Universite Libre de Bruxelles.
    7. María Alejandra Arias & Ana María Ibáñez & Andrés Zambrano, 2014. "Agricultural Production Amid Conflict: The Effects of Shocks, Uncertainty, and Governance of Non-State Armed Actors," Documentos CEDE 11005, Universidad de los Andes, Facultad de Economía, CEDE.
    8. Nillesen, Eleonora & Verwim, Philip, 2010. "A Phoenix in Flames? Portfolio Choice and Violence in Civil War in Rural Burundi," WIDER Working Paper Series 044, World Institute for Development Economic Research (UNU-WIDER).
    9. Adriana Camacho & Catherine Rodriguez, 2013. "Firm Exit and Armed Conflict in Colombia," Journal of Conflict Resolution, Peace Science Society (International), vol. 57(1), pages 89-116, February.
    10. Amaka Nnaji & Nazmun Ratna & Alan Renwick & Wanglin Ma, 2023. "Risk perception, farmer−herder conflicts and production decisions: evidence from Nigeria," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 50(2), pages 683-716.
    11. Alexander Cotte Poveda, 2011. "Estimating Effectiveness of the Control of Violence and Socioeconomic Development in Colombia: An Application of DEA and Data Panel Approach," Serie de Documentos en Economía y Violencia 8356, Centro de Investigaciones en Violencia, Instituciones y Desarrollo Económico (VIDE).

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