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Poverty in the Face of Conflict

Final Report Summary - POVCON (Poverty in the Face of Conflict)

Households in developing countries have to cope with a myriad of uncertain events, some of which may happen simultaneously. One example is the interplay between climatic shocks and violent conflict, such as the floods in Pakistan in 2010-11 and the 2011 drought-induced famine in east Africa. These events have raised awareness about potential interactions between political insecurity, economic vulnerability and the impact of natural disasters. In general, people living in fragile and conflict-affected states find it harder to cope with natural disasters given the impact of violence and instability on health, basic service provision, social cohesion, mobility opportunities and livelihoods. Evidence on how individuals, households and communities cope simultaneously with violence and natural disasters is, however, largely anecdotic and descriptive.

The main objective of this project is to ascertain how the presence of armed conflict affects the capacity of households to cope with shocks and uncertainty. This gap in the literature has been addressed by analysing the combined effect of exposure to political violence and drought on child nutrition. The context of the analysis is the southern Indian state of Andhra Pradesh, which was for several decades affected by a left-wing (Naxal) guerrilla insurgency. Households in Andhra Pradesh face in addition cyclical climatic shocks that affect the nutrition levels of their children, often quite severely.

Instrumental variable models using longitudinal data from the Young Lives Project in Andhra Pradesh, yield two key results: First, drought has an adverse effect on child nutrition in Andhra Pradesh only in violence-affected communities. Second, political violence has large negative effects on child nutrition through a reduction of the ability of households to cope with drought. These results are complemented by the use of a unique natural experiment created by a ceasefire in 2004, which shows that the eight months ceasefire period reversed the adverse effects of drought in communities previously affected by the conflict.

Further analysis suggests that the adverse combined effect of conflict and drought on child nutrition outcomes may be explained by the levels of isolation faced by households in insurgency areas, which affect the portfolio of coping strategies available to them and restricts access to public goods and programs during periods of drought.

These results offer a new important contribution to a well-established literature in development economics on the welfare effects of covariate and idiosyncratic shocks by adding the analysis of political constraints to a discussion that was so far mostly restricted to an economic perspective. The results also complement to a substantial literature on the effects of political violence on human capital outcomes, including child nutrition. Many of these studies have suggested that the adverse effects of violent conflict on child nutrition outcomes may be largely caused by the inability of households to cope with second-order effects of the conflict, the precise identification of these mechanisms has however remained elusive because it is usually difficult to clearly attribute the causal effects of conflict at the micro-level to precise wider institutional and economic changes that may take place simultaneously. The use of both an instrumental variable strategy and a quasi-experiment to illustrate the causal effect of conflict on child nutrition outcomes through its impact on the ability of households to cope with adverse economic shocks is thus a large contribution to the state of the art of this literature.

The project also investigates the impact of low-level conflict on one of the key drivers of economic decision-making: income expectations. Studies of conflict affected populations have shown worrying negative effects on mental wellbeing such as hopelessness about the future, low projections into the future and losses of trust and social structure – all of which might have an impact on peoples expectations regarding their income and subsequently on their choices. It has been shown, for example, that populations in highly contested areas abandon investments even in highly profitable livelihoods because they fear to lose everything once again after having been displaced and experienced losses repeatedly. Furthermore, changes in income expectations could affect school drop out rates for children in conflict areas and their propensity to be engaged in child labour in order to contribute to household incomes. It could also affect the ease with which individuals could be recruited by rebel groups as opportunity costs sink if expectations decrease. Thus, the question whether and how conflict affects income expectations is a practical one with serious implications for livelihoods, the development of (local) economies and conflict dynamics. But the paper also adds to the methodological literature as most of the studies of the formation of income expectations have used data from high-income countries and focused on household or individual level covariates.

The question has been addressed using data collected for the evaluation of the Familias en Acción program in Colombia, which has experienced violent conflict for over four decades. Analysing the probability distribution of household income expectations, we find that conflict has a negative impact on mean expected household incomes and leads to more uncertainty. Individuals in conflict areas perceive bad outcomes to be much more likely than individuals in low or no conflict areas. Particularly in highly affected areas people expect very bad scenarios.

At the same time, individuals in rather peaceful communities react strongly to new violence and those in very violent communities react strongly to cessations or large decreases in violence, suggesting that even after 40 years of violent conflict people are still sensitive to changes in the configuration of conflict patterns. This in turn suggests that at least in term of expectations, short-term recovery is possible and negative effects on outlooks on life and hopelessness are (at least partially) reversible. This is similar to the findings in the first paper, which showed that even during the short time span of a ceasefire, households can ‘readapt’ rapidly in order to offset the effects of drought and thus, rapid recovery seems possible. Both results have positive implications for policy interventions aimed at supporting peace building and development after conflict. It seems, that making a credible commitment to peace and strengthening a sense of positive outlook into the future could be elements that help livelihoods, well being and economic recovery at local and national levels.