Conflict and the Composition of Economic Activity in Afghanistan
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 inte...
| Main Authors: | , , |
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| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/407711584460216528/Conflict-and-the-Composition-of-Economic-Activity-in-Afghanistan http://hdl.handle.net/10986/33448 |
| Summary: | 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. |
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