Armed Conflict and Unemployment in Colombia : The Role of US Interdiction Policy

We exploit the exogenous variation arising from the drug interdiction policy of the United States in the 1990s to estimate the impact of high-intensity conflict on unemployment in Colombia. Using synthetic control method and difference-in-differences models, we find that over the period 1994-2014, the high-intensity armed conflict raised unemployment rate in Colombia by about 3.9 to 4.3 percentage points, almost half of the pre-intervention average of 10 percent. We also find larger unemployment effects for women compared to men, possibly reflecting changes in household dynamics among conflict-affected households. The empirical exercise in this paper contributes to the quantification of the welfare effects of violence and conflict through the labor market. These findings not only suggest that the high-intensity conflict had placed Colombia’s economy at a regional disadvantage in Latin America, but also highlight gender differentials in the rect effects of conflicts that policymakers can help mitigate