Abstract |
This paper examines how violent conflict affects the decision to become a self-employed shopkeeper or vendor, proposing road insecurity as a new channel of conflict transmission. In a conflict situation, the destruction of roads and the risk of assaults increase the cost of transporting goods. The impact of distance to the next market on the probability of opening a shop is thus expected to differ between conflict and non-conflict districts. I test this prediction in the context of the Peruvian armed internal conflict. Using a logit model, I find that the probability of opening a shop decreases with distance to the next market in conflict districts. In a 2SLS specification, distance to Ayacucho and temperature are used as instruments for conflict and its interaction with distance to market. The coefficient of interest becomes insignificant,but exogeneity cannot be rejected. Several robustness checks provide further support to the logit result. |