Business as Unusual. An Explanation of the Increase of Private Economic Activity in High-Conflict Areas in Afghanistan

Working Paper
Published on 25 June 2015


In this paper, Ciarli, Kofol, and Menon (2015) use a unique dataset that combines spatial detailed information on conflict events and on households' activity, to show a positive and significant correlation between violent conflict and entrepreneurship in Afghanistan. They build spatial and IV identifications to estimate the effect of different measures of conflict on the investment in a range of private economic activities of nearby households. The results consistently show that the level of conflict, its impact, and to a lesser extent its frequency, increase the probability that a household engages in self-employment activities with a lower capital intensity and in activities related to subsistence agriculture, and reduce the probability of investing in higher capital self-employment. Overall, by increasing entrepreneurship, conflict pushes the country towards a regressive structural change. However, the magnitude of most of the effects is quite small. The paper contributes to a literature that, due to data constraints and identification issues, has not yet delivered conclusive evidence.


Tommaso Ciarli

University of Sussex

Chiara Kofol

Royal Holloway, University of London

Carlo Menon

Organisation for Economic Co-operation and Development