The Legacy of Conflict: Aggregate Evidence from Sierra Leone (full text here)
This paper studies the general equilibrium impact of civil war in Sierra Leone. I first use an instrumental variable (IV) strategy and geographic conflict variation to estimate reduced-form effects. I show that civil war leads to affected areas having a higher share of workers in agriculture, fewer educated workers and lower worker income. In order to explicitly take into account general equilibrium effects such as selective migration in response to the war, I then develop an economic geography model. The model sheds light on different mechanisms through which conflict affects aggregate income: Changes in education, firm productivity and individual productivity have both direct effects on income and indirect effects by changing the allocation of labor across sectors and locations. Changes in amenities also affect the spatial allocation of labor. Next, while education outcomes are observed, I structurally estimate all unobserved parameters. In particular, I leverage the structure of the model along with observed income information and migration flows to identify firm productivities, amenities and average individual productivities. Finally, I use the model to perform counterfactual simulations. Aggregate income in Sierra Leone is estimated to be 32% lower today as a result of the civil war. Importantly, firm productivity losses can explain most of the decrease while human capital reductions alone can only account for a small part of the effect. Selective migration in response to the war also seems to play an important role and implies that local reduced-form effects are misleading when trying to estimate aggregate effects.
The Impact of Peace: Evidence from Nigeria (full text here)
This paper studies the economic consequences of peace -- or conversely, conflict -- in Nigeria. I exploit a natural experiment in the country: In 2009, the Nigerian government implemented a peace policy in the Niger Delta region. This is used as a policy shock to assess the effect of a conflict reduction. My first finding is that a peace period followed the introduction of the policy in the region. To evaluate the benefits of this peace, I then construct a synthetic control region from the states that are not part of the Niger Delta region and therefore unaffected by the policy as a within-country counterfactual to the Niger Delta region. I find that peace increased household expenditures by 19% four years later. In order to assess potential mechanisms behind this economic upturn, I consider self-employment income and education. I find an increase in self-employment income by 67% and in education by 0.5 years of schooling. While few papers study the link between conflict and business activity, the strong increase of self-employment income in response to peace suggests that this is an important relationship for policy consideration.