COSTS OF CONFLICT

INSECURITY HARMS ECONOMY MORE THAN VIOLENCE

The majority of the financial costs of conflict for an ordinary household arise from insecurity rather than actual violence. That is the central message of research on Northern Uganda by Marc Rockmore, presented at the Royal Economic Society’s 2013 annual conference.

The research shows how the costs from insecurity arise as household try to insure themselves against the risk of violence. They do this by trying to minimise the likelihood of being attacked and the potential losses. This ‘self-insurance’ against the risk of violence is costly as it means that people move away from their more profitable peacetime activities – and this cost remains even if the violence never surfaces.

The study is one of the first to show this using data. Focusing on a unique data set of over 690,000 households during Northern Uganda’s civil war, the research finds that many people faced limited options to diversify income or to insure themselves against risk. As a result, many households were forced to make all their adjustments by changing their mix of livestock and crops.

By changing the composition of crops and livestock, insecurity can affect the overall nutrition of households. This affects not only their income during conflicts but also their long-run potential. For example, children who grow up during conflicts tend to not reach their full physical potential, thereby reducing their income-generating ability later in life. The author notes:

‘While these responses limit the potential impact of violence, they come with a small, but certain cost – around 6% of people’s consumption. That is, irrespective of whether violence occurs, responses to the risk of violence lead to certain losses’.

If the costs from conflict primarily arise from the risk of violence rather than actual violence, the author argues that there are three implications:

  • First, the costs are widely spread throughout the population. As a result, a narrow focus misses many of the ‘silent victims’ of violence.
  • Second, responses to conflict need not be delayed until the outbreak of violence. The mere threat of violence, such as contested elections, may be sufficient to trigger costly responses by households.
  • Third, interventions need to help households to reduce risk. For example, donations of profitable peacetime assets, such as cows, may increase perceived risk and lead to aggravated responses from households.

The author concludes:

‘My research shows that a narrow focus on violence and its effects underestimates the household costs from conflict and leads to inefficient and potentially costly policy interventions’.

More…

Contrary to expectations, the majority of the household costs from conflict arise from insecurity and not from violence. This difference has key implications both for policy and our understanding of the economic lives of the roughly one in four individuals who live in conflict, fragile or violence-prone countries. That is the central message of research on Northern Uganda by Marc Rockmore, presented at the Royal Economic Society’s 2013 annual conference.

The costs from insecurity arise as household try to insure themselves against the risk of violence. They do this by tying to minimise the likelihood of being attacked and/or the potential losses. This ‘self-insurance’ against the risk of violence is costly as individuals change from their optimal and profitable behaviour during periods without insecurity.

Within Northern Uganda, there are limited options to diversify income sources or to insure formally against risk. Consequently, households are forced to make all their adjustments in their livestock and crop portfolios. This influences not only their income during conflicts but also potentially their long-run economic trajectories.

For example, research shows that children who grow up during conflicts tend to not reach their full physical potential, thereby reducing their income-generating ability. By changing the composition of crops and livestock, insecurity affects the dietary diversity and likely overall nutrition of households.

If the costs from conflict primarily arise for the risk of violence, this has three direct implications:

  • First, the costs are widely spread throughout populations. Consequently, a narrow focus misses many of the ‘silent victims’ of violence.
  • Second, responses to conflict need not be delayed until the outbreak of violence. The mere threat of violence, such as contested elections, may be sufficient to trigger costly responses by households.
  • Third, interventions need to help households to reduce risk. For example, donations of profitable peacetime assets, such as cows, may increase perceived risk and lead to aggravated responses from households.

More broadly, the research shows that a narrow focus on violence and its effects underestimates the household costs from conflict and leads to inefficient and potentially costly policy interventions.

While household responses to conflict risk have been previously discussed, these have never been directly examined empirically. By focusing on Northern Uganda and using a unique dataset of over 690,000, the research allows for the first comprehensive examination of household responses to risk.

The results show that households have difficulty responding to insecurity. Informal insurance networks cannot help since the insecurity is felt by all. Consequently, due to the limited opportunities to diversify income, households are forced to completely self-insure within their livestock and crop portfolios. While these responses limit the potential impact of violence, they come with a small, but certain cost (around -6% consumption per capita). That is, irrespective of whether violence occurs, responses to the risk of violence lead to certain losses.

ENDS


Contact:

Marc Rockmore
mrockmore@clarku.edu
(203)-606-9390 (USA)

RES media consultant Romesh Vaitilingam:
+44 (0) 7768 661095
romesh@vaitilingam.com
@econromesh

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