Peace Dividends: The Economic Effects of Colombia's Peace Agreement
Miguel Fajardo-Steinh\"auser

TL;DR
This study evaluates the economic impact of Colombia's peace agreement with FARC, finding significant violence reduction but no corresponding economic growth, highlighting the importance of state capacity for economic benefits.
Contribution
It provides empirical evidence that peace agreements alone do not boost economic activity without concurrent investments in state capacity.
Findings
Violence decreased significantly in FARC-affected areas.
No measurable economic growth observed post-agreement.
Lack of state capacity explains the absence of economic benefits.
Abstract
The last decades have seen a resurgence of armed conflict globally, renewing the need for durable peace agreements. In this paper, I evaluate the economic effects of the peace agreement between the Colombian government and the largest guerrilla group in the country, the FARC, ending one of the lengthiest and most violent armed conflicts in recent history. Using a difference-in-difference strategy comparing municipalities that historically had FARC presence and those with presence of a similar, smaller guerrilla group, the ELN, before and after the start of a unilateral ceasefire by the FARC, I establish three sets of results. First, violence indicators significantly and sizeably decreased in historically FARC municipalities. Second, despite this substantial reduction in violence, I find precisely-estimated null effects across several economic indicators, suggesting no effect of the…
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Taxonomy
TopicsHistory and Politics in Latin America · Defense, Military, and Policy Studies · Conflict, Peace, and Violence in Colombia
