Peaceful Entry : Entrepreneurship Dynamics During Colombia’S Peace Agreement

While there is a large literature on how conflict affects entrepreneurship and investment, little is known about how the end of a conflict affects businesses and firms’ creation. The direction of the effect is not obvious as conflicts bequest poverty and inequality --reducingthe returns of investment--and the territorial vacuum of power inherent to most post-conflict situations may trigger new violent cycles. Studying Colombia’s recent peace agreement and using a difference-in-differences empirical strategy, we document that dynamics of entrepreneurship in traditionally violent areas closely mapped the politics that surrounded the peace agreement. When the agreement was imminent after a 5-decade conflict and violence had plummeted, local investors from all economic sectors established new firms and created jobs. Instead, when the agreement was rejected by a tiny vote margin in a referendum and the party that promoted this rejection raised to power, the rate of firms’ creation rapidly reversed