Armed conflict characteristics and its effects on firm exit

Abstract

This paper uses two unique panel data sets to study the causal effect that different characteristics of the armed conflict have over firm exit in Colombia.Using a fixed effects estimation methodology at the plant level and controlling for the possible endogeneity of armed conflict through the use of instrumental variables, we find that the particular armed group that operates in a given region, the level of polarization of the conflict as well as the specific target of the attack impact in a differential manner the probability of firm exit.This poses important implications for policy recommendations and actions in the different regions of the country.