Publication: Household Investment under Violence - The Colombian Case
Loading...
Date
2008-09
ISSN
Published
2008-09
Author(s)
Editor(s)
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.
Link to Data Set
Citation
“Grun, Rebekka E.. 2008. Household Investment under Violence - The Colombian Case. Policy Research Working Paper No. 4713. © World Bank. http://hdl.handle.net/10986/6986 License: CC BY 3.0 IGO.”
Associated URLs
Associated content
Other publications in this report series
Publication Geopolitics and the World Trading System(Washington, DC: World Bank, 2024-12-23)Until the beginning of this century, the GATT/WTO system worked. Economic research provided a compelling explanation. It showed that if governments maximize the well-being of their own countries broadly defined, GATT/WTO principles would facilitate mutually beneficial cooperation over their trade policy choices. Now heightened geopolitical rivalry seems to have undermined the WTO. A simple transposition of the previous rationalization suggests that geopolitics and trade cooperation are not compatible. The paper shows that this is only true if rivalry eclipses any consideration of own-country well-being. In all other circumstances, there are gains from trade cooperation even with geopolitics. Furthermore, the WTO’s relevance is in question only if it adheres too rigidly to its existing rules and norms. Through measured adaptation to the geopolitical imperative, the WTO can continue to thrive as a forum for multilateral trade cooperation in the age of geopolitics.Publication The Macroeconomic Implications of Climate Change Impacts and Adaptation Options(Washington, DC: World Bank, 2025-05-29)Estimating the macroeconomic implications of climate change impacts and adaptation options is a topic of intense research. This paper presents a framework in the World Bank's macrostructural model to assess climate-related damages. This approach has been used in many Country Climate and Development Reports, a World Bank diagnostic that identifies priorities to ensure continued development in spite of climate change and climate policy objectives. The methodology captures a set of impact channels through which climate change affects the economy by (1) connecting a set of biophysical models to the macroeconomic model and (2) exploring a set of development and climate scenarios. The paper summarizes the results for five countries, highlighting the sources and magnitudes of their vulnerability --- with estimated gross domestic product losses in 2050 exceeding 10 percent of gross domestic product in some countries and scenarios, although only a small set of impact channels is included. The paper also presents estimates of the macroeconomic gains from sector-level adaptation interventions, considering their upfront costs and avoided climate impacts and finding significant net gross domestic product gains from adaptation opportunities identified in the Country Climate and Development Reports. Finally, the paper discusses the limits of current modeling approaches, and their complementarity with empirical approaches based on historical data series. The integrated modeling approach proposed in this paper can inform policymakers as they make proactive decisions on climate change adaptation and resilience.Publication Global Poverty Revisited Using 2021 PPPs and New Data on Consumption(Washington, DC: World Bank, 2025-06-05)Recent improvements in survey methodologies have increased measured consumption in many low- and lower-middle-income countries that now collect a more comprehensive measure of household consumption. Faced with such methodological changes, countries have frequently revised upward their national poverty lines to make them appropriate for the new measures of consumption. This in turn affects the World Bank’s global poverty lines when they are periodically revised. The international poverty line, which is based on the typical poverty line in low-income countries, increases by around 40 percent to $3.00 when the more recent national poverty lines as well as the 2021 purchasing power parities are incorporated. The net impact of the changes in international prices, the poverty line, and new survey data (including new data for India) is an increase in global extreme poverty by some 125 million people in 2022, and a significant shift of poverty away from South Asia and toward Sub-Saharan Africa. The changes at higher poverty lines, which are more relevant to middle-income countries, are mixed.Publication Global Socio-economic Resilience to Natural Disasters(Washington, DC: World Bank, 2025-05-22)Most disaster risk assessments use damages to physical assets as their central metric, often neglecting distributional impacts and the coping and recovery capacity of affected people. To address this shortcoming, the concepts of well-being losses and socio-economic resilience—the ability to experience asset losses without a decline in well-being—have been proposed. This paper uses microsimulations to produce a global estimate of well-being losses from, and socio-economic resilience to, natural disasters, covering 132 countries. On average, each $1 in disaster-related asset losses results in well-being losses equivalent to a $2 uniform national drop in consumption, with significant variation within and across countries. The poorest income quintile within each country incurs only 9% of national asset losses but accounts for 33% of well-being losses. Compared to high-income countries, low-income countries experience 67% greater well-being losses per dollar of asset losses and require 56% more time to recover. Socio-economic resilience is uncorrelated with exposure or vulnerability to natural hazards. However, a 10 percent increase in GDP per capita is associated with a 0.9 percentage point gain in resilience, but this benefit arises indirectly—such as through higher rate of formal employment, better financial inclusion, and broader social protection coverage—rather than from higher income itself. This paper assess ten policy options and finds that socio-economic and financial interventions (such as insurance and social protection) can effectively complement asset-focused measures (e.g., construction standards) and that interventions targeting low-income populations usually have higher returns in terms of avoided well-being losses per dollar invested.Publication From Patriarchy to Policy(Washington, DC: World Bank, 2025-05-29)Legal institutions play an important role in shaping gender equality in economic domains, from inheritance to labor markets. But where do gender equal laws come from? Using cross-country data on social norms and legal equality, this paper investigates the socio-cultural roots of gender inequity in the legal system and its implications for female labor force participation. To identify the impact of social norms, the analysis uses an empirical strategy that exploits pre-modern differences in ancestral patriarchal culture as an instrument for present-day gender norms. The findings show that ancestral patriarchal culture is a strong predictor of contemporary norms, and conservative social norms are associated with more gender inequality in the de jure legal framework, the de facto implementation of laws, and the labor market. The paper presents evidence for a political selection mechanism linking norms to laws: countries with more conservative norms elect political leaders who are more hostile to gender equality, who then pass less progressive legislation. The results highlight the cultural roots and political drivers of legalized gender inequality.
Journal
Journal Volume
Journal Issue
Collections
Related items
Showing items related by metadata.
Publication Exit and Save : Migration and Saving under Violence(2009-04-01)This paper examines how households trade off migration and savings when subject to exogenous violence. The authors propose that households under violence decide jointly on migration and saving, because a higher asset-stock is more difficult to carry to a new place. When confronted with exogenous violence, households are expected to consider migration, and reduce their assets, both in order to reduce their exposure to violence, and to make migration easier. In some cases, after a migration decision has been taken, savings can increase as a function of violence to ensure a minimum bundle to carry. Empirical evidence from rich Colombian micro-data supports the conceptual framework for violence that carries a displacement threat, such as guerrilla attacks.Publication Malawi - Mutual Evaluation Report : Anti-Money Laundering and Combating the Financing of Terrorism(Washington, DC, 2008-12)Malawi is a land-locked country. It is bordered by Zambia to the north-west, Tanzania to the north and Mozambique, which surrounds it on the east, south and west. This Report provides a detailed assessment of the Anti-Money Laundering AML/Combating the Financing of Terrorism CFT measures in place in Malawi as of May 11, 2008, two months after completion of the on-site mission. It describes analyses and makes an assessment of the measures and systems in place as of that date, and provides recommendations on how certain aspects of the system could be strengthened. This report provides a detailed assessment of the level of compliance, and provides recommendations to improve compliance with the prevailing context of Malawi. The government of Malawi has demonstrated a high level of commitment to establishing a strong AML/CFT framework. This commitment is reflected by the enactment of the Money Laundering proceeds of serious crime and Terrorist Financing act in August 2006 (ML and TF Act) and the beginnings of an implementation program. Finally, in order to ensure the effective implementation of the ML and TF framework, building the technical AML capacity/knowledge of law enforcement agencies, the public prosecutors and the judiciary will be critical.Publication Trafficking and Fragility in West Africa(World Bank Group, Washington, DC, 2014-10)Trafficking is an emerging concern in West Africa. In 2011, 17 percent of all cocaine consumed in Europe -- 21 tons -- passed through the region, for a retail value of US$1.7 billion. This paper discusses the evolution of trafficking in the region and provides estimates of the size and value of trafficking flows to demonstrate the significance of this illegal activity. Although this topic is gaining increasing attention, less attention has been has been paid to how trafficking is perpetuating fragility. This paper contributes to this area of research by identifying five channels through which trafficking is intensifying fragility in the region. The relative importance of each channel is discussed, with specific countries as case-study examples. Possible programmatic responses are then suggested with examples of policy approaches successfully adopted elsewhere in the world.Publication Justice for Forests : Improving Criminal Justice Efforts to Combat Illegal Logging(Washington, DC: World Bank, 2012-03-14)Every two seconds, across the world, an area of forest the size of a football field is clear-cut by illegal loggers. In some countries, up to 90 percent of all the logging taking place is illegal. Estimates suggest that this criminal activity generates approximately US$10-15 billion annually worldwide funds that are unregulated, untaxed, and often remain in the hands of organized criminal gangs. Thus far, domestic and international efforts to curb forest crimes have focused on preventative actions, but they have had little or no significant impact. While prevention is an essential part of enforcement efforts to tackle illegal logging, it has not halted the rapid disappearance of the world's old-growth trees. New ideas and strategies are needed to preserve what is left of forests. This paper suggests that current practice be combined with a more targeted, punitive approach, through more effective use of the criminal justice system. It argues that the criminal justice system should form an integral part of any balanced and organized strategy for fighting forest crime. This strategy should include initiatives to enhance the efficiency of criminal justice in combating illegal logging that is, the investigation, prosecution, and conviction of cases, as well as the confiscation of the proceeds of criminal activity. These initiatives should be deployed in parallel with preventive programs, and the two approaches should complement and reinforce each other. The criminal justice system has been used in the fight against illegal logging, but only in very sporadic instances and in limited and ineffective ways. Moreover, in those few cases, it has tended to target low-level criminals whose involvement in illegal logging is due to poverty. As such, it has created no real deterrent and has encouraged skeptics to further discount the relevance of criminal justice methods. The objective of this paper is to inform policy makers and forestry and law enforcement actors how they can use the criminal justice system in fighting illegal logging. It seeks to mobilize them to take action and address the various criminal acts involved in illegal logging operations. The paper puts forward practical suggestions that can be implemented to achieve a tangible improvement in this fight. Rather than focusing on a single element of the criminal justice system, it provides a broad overview of the topic. Future papers may provide an opportunity to flesh out further detail.Publication Trafficking and Fragility in West Africa(World Bank, Washington, DC, 2015)Trafficking is an emerging concern in West Africa that is gaining increasing attention from the international community. This paper examines the relationship between trafficking and fragility in the region through a meta-analysis of existing knowledge and data on the subject. Given the scope of this paper, we will not attempt to provide any primary empirical or qualitative analysis, but instead focus on offering a comprehensive, unbiased overview of the recent policy and academic literature on the subject, which we hope will assist development practitioners working in the region and help the World Bank identify possible programmatic responses. The authors start this paper by defining trafficking to frame our analysis, and then provide an overview of the trafficking economy across the region. Next, authors outline the potential channels between trafficking and fragility, discussing the actors involved (organized criminal groups, rebels, local or national level politicians, the military, and civilians) and their relevance to specific countries. Finally, the authors present our suggestions on possible policy and programmatic responses, based on identifying both regional and external dimensions to the problems.
Users also downloaded
Showing related downloaded files
Publication Governance Matters VIII : Aggregate and Individual Governance Indicators 1996–2008(2009-06-01)This paper reports on the 2009 update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2008: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. These aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 33 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. They find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. The aggregate indicators, together with the disaggregated underlying indicators, are available at www.govindicators.org.Publication Government Matters III : Governance Indicators for 1996-2002(World Bank, Washington, DC, 2003-08)The authors present estimates of six dimensions of governance covering 199 countries and territories for four time periods: 1996, 1998, 2000, and 2002. These indicators are based on several hundred individual variables measuring perceptions of governance, drawn from 25 separate data sources constructed by 18 different organizations. The authors assign these individual measures of governance to categories capturing key dimensions of governance and use an unobserved components model to construct six aggregate governance indicators in each of the four periods. They present the point estimates of the dimensions of governance as well as the margins of errors for each country for the four periods. The governance indicators reported here are an update and expansion of previous research work on indicators initiated in 1998 (Kaufmann, Kraay, and Zoido-Lobat 1999a,b and 2002). The authors also address various methodological issues, including the interpretation and use of the data given the estimated margins of errors.Publication Measuring Financial Inclusion : The Global Findex Database(World Bank, Washington, DC, 2012-04)This paper provides the first analysis of the Global Financial Inclusion (Global Findex) Database, a new set of indicators that measure how adults in 148 economies save, borrow, make payments, and manage risk. The data show that 50 percent of adults worldwide have an account at a formal financial institution, though account penetration varies widely across regions, income groups and individual characteristics. In addition, 22 percent of adults report having saved at a formal financial institution in the past 12 months, and 9 percent report having taken out a new loan from a bank, credit union or microfinance institution in the past year. Although half of adults around the world remain unbanked, at least 35 percent of them report barriers to account use that might be addressed by public policy. Among the most commonly reported barriers are high cost, physical distance, and lack of proper documentation, though there are significant differences across regions and individual characteristics.Publication Design Thinking for Social Innovation(2010-07)Designers have traditionally focused on enchancing the look and functionality of products.Publication Governance Matters IV : Governance Indicators for 1996-2004(World Bank, Washington, DC, 2005-06)The authors present the latest update of their aggregate governance indicators, together with new analysis of several issues related to the use of these measures. The governance indicators measure the following six dimensions of governance: (1) voice and accountability; (2) political instability and violence; (3) government effectiveness; (4) regulatory quality; (5) rule of law, and (6) control of corruption. They cover 209 countries and territories for 1996, 1998, 2000, 2002, and 2004. They are based on several hundred individual variables measuring perceptions of governance, drawn from 37 separate data sources constructed by 31 organizations. The authors present estimates of the six dimensions of governance for each period, as well as margins of error capturing the range of likely values for each country. These margins of error are not unique to perceptions-based measures of governance, but are an important feature of all efforts to measure governance, including objective indicators. In fact, the authors give examples of how individual objective measures provide an incomplete picture of even the quite particular dimensions of governance that they are intended to measure. The authors also analyze in detail changes over time in their estimates of governance; provide a framework for assessing the statistical significance of changes in governance; and suggest a simple rule of thumb for identifying statistically significant changes in country governance over time. The ability to identify significant changes in governance over time is much higher for aggregate indicators than for any individual indicator. While the authors find that the quality of governance in a number of countries has changed significantly (in both directions), they also provide evidence suggesting that there are no trends, for better or worse, in global averages of governance. Finally, they interpret the strong observed correlation between income and governance, and argue against recent efforts to apply a discount to governance performance in low-income countries.