Investment Under Risks and Uncertainty in Afghanistan
This paper investigates the state of low investment in Afghanistan by studying how investment decisions interact with risks and uncertainty in the presence of underdeveloped financial markets. The analysis shows that investing firms experience a hi...
| Main Authors: | , , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2018
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/181341526388484842/Investment-under-risks-and-uncertainty-in-Afghanistan http://hdl.handle.net/10986/29849 |
| Summary: | This paper investigates the state of low
investment in Afghanistan by studying how investment
decisions interact with risks and uncertainty in the
presence of underdeveloped financial markets. The analysis
shows that investing firms experience a higher probability
of being affected by events related to crime and corruption
and spend more on security arrangements. Firms that
participate in the formal financial sector are also subject
to higher levels of risk and uncertainty. As more productive
firms face higher risks and uncertainty, a model of resource
allocation with heterogeneous firms is used to quantify the
economic loss from crime and corruption. The estimated
aggregate output loss of 12 percent is significantly higher
than the 7 percent loss observed in the absence of the
resource allocation channel. |
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