Natural and agricultural resources for which there is a substantial black market, such as
coca, opium, and diamonds, appear especially likely to be exploited by the parties to a civil
conflict. Even legally traded commodities such as oil and timber have been linked to civil war.
On the other hand, these resources may also provide one of the few reliable sources of
income in the countryside. In this paper, we study the economic and social consequences of
a major exogenous shift in the production of one such resource – coca paste – into
Colombia, where most coca leaf is now harvested. Our analysis shows that this shift
generated only modest economic gains in rural areas, primarily in the form of increased selfemployment
earnings and increased labor supply by teenage boys. The results also suggest
that the rural areas which saw accelerated coca production subsequently became more
violent, while urban areas were affected little. The acceleration in violence is greater in
departments (provinces) where there was a pre-coca guerilla presence. Taken together,
these findings are consistent with the view that the Colombian civil conflict is fueled by the
financial opportunities that coca provides, and that the consequent rent-seeking activity by
combatants limits the economic gains from coca cultivation.