Published in:
The Review of Economics and Statistics 2014 96 (5) pp. 949 - 966.
DOI:10.1162/REST_a_00418
Abstract:
To explain the rise in Afghan opium production, we explore how rising conflicts change the incentives of farmers. Conflicts make illegal opportunities more profitable as they increase the perceived lawlessness and destroy infrastructure crucial to alternative crops. Exploiting a unique data set, we show that Western hostile casualties, our proxy for conflict, have a strong impact on subsequent local opium production. Using the period after the planting season as a placebo test, we show that conflict has a strong effect before but no effect after planting, indicating causality.