Household Investment under Violence - The Colombian Case
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...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2008/09/9828541/household-investment-under-violence-colombian-case http://hdl.handle.net/10986/6986 |
| Summary: | 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. |
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