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Conflict and the Composition of Economic Activity in Afghanistan

Virgilio Galdo, Gladys Lopez-Acevedo () and Martin Rama
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Gladys Lopez-Acevedo: World Bank

Authors registered in the RePEc Author Service: Gladys Lopez-Acevedo

No 153, IZA Policy Papers from Institute of Labor Economics (IZA)

Abstract: Despite informality being the norm in conflict-affected countries, most estimates of the impact of conflict on economic activity rely on formal sector data. Using high-frequency data from Afghanistan, this paper assesses how surges in conflict intensity affect not only the formal sector, but also informal and illicit activities. Nighttime light provides a proxy for aggregate economic activity, mobile phone traffic by registered firms captures fluctuations in formal sector output, and the land surface devoted to poppy cultivation gives a measure of illicit production. The unit of observation is the district and the period of reference is 2012–16. The same dynamic specification and controls are used for the estimation in the three cases, making the results comparable across sectors. Controls include the presence of combat troops and the level of foreign aid at the local level, which both influence local living standards in Afghanistan. The results show that an increase in conflict-related casualties has a strong negative impact on formal economic activity in the following quarter and a positive effect on illicit activity after two quarters. The impact on aggregate economic activity is negative, but more muted.

Keywords: Afghanistan; conflict; economic activity (search for similar items in EconPapers)
JEL-codes: D74 E21 F35 I32 O17 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2020-03
New Economics Papers: this item is included in nep-dev, nep-iue and nep-mac
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Conflict and the composition of economic activity in Afghanistan (2021) Downloads
Working Paper: Conflict and the Composition of Economic Activity in Afghanistan (2020) Downloads
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