Abstract
To explain the recent 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. Exploiting the discontinuity at the end of the planting season, we find that conflicts have strong effects before and no effect after planting, indicating causality. The effects are strongest where governmental law enforcement is weak.
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(Last edit: July 12, 2013)