Armed conflict and unemployment in Colombia: the role of US drug interdiction policy

We exploit the exogenous variation arising from the drug interdiction policy of theUSA in the 1990s to estimate the impact of high-intensity conflict on unemploymentin Colombia. Using the synthetic control method, we find that between 1994 and 2014,the high-intensity armed conflict raised unemployment rates in Colombia by about 4.3percentage points, almost half of the pre-intervention average of 10 percent. When wecompare the evolution of the unemployment rate of women in Colombia to that ofwomen in other Latin American countries, the estimated impact of the high-intensityarmed conflict appears to be slightly larger than when the same comparison is done formen. Our empirical exercises in this paper contribute to quantifying the welfare effectsof violence and conflict via the labor market. Our findings not only suggest that thehigh-intensity conflict had placed Colombia’s economy at a regional disadvantage inLatin America but also highlight the welfare effects of violence which policymakerscan help to mitigate.