Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/243439
Authors: 
Galdo, Virgilio
López Acevedo, Gladys
Rama, Martín
Year of Publication: 
2020
Series/Report no.: 
IZA Policy Paper No. 153
Publisher: 
Institute of Labor Economics (IZA), Bonn
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.
Subjects: 
Afghanistan
conflict
economic activity
JEL: 
D74
E21
F35
I32
O17
Document Type: 
Working Paper

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