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Legacies of violence: trust and market development

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Abstract

We study the effect of individual exposure to civil conflict on trust and preferences for market participation. We conducted behavioral experiments and surveys among 426 randomly selected individuals more than a decade after the end of the Tajik civil war. We find that exposure to violence undermines trust within localities, decreases the willingness to engage in impersonal exchange, and reinforces kinship-based norms of morality. The effect is strongest where infighting was most severe and where political polarization is high. Robustness of the results to the use of pre-war controls, village fixed effects, and alternative samples suggest that selection into victimization is unlikely to explain the results.

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Notes

  1. Unlike many other civil wars, there has been no formal investigation of war crimes, what leaves substantial uncertainty, even today, about the identity of perpetrators of violence or authors of denunciations. This contrasts with, for example, post-conflict Rwanda, where prosecution of war crimes by international, national and, more importantly local “Gacaca” tribunals is an integral part of the reconciliation process (Bloomfield et al. 2003).

  2. For a review of the effects of civil war, see Blattman and Miguel (2010).

  3. Some related evidence is presented by Cassar et al. (2011) who find that Thai subjects affected by the 2004 tsunami are, four and a half years after the event, significantly more trusting and more risk averse.

  4. As a further example of the not-identifiable problem, in one story recounted to one of the authors in an interview, if someone were caught without documentation, they might be asked to pronounce certain words or name specific objects to catch subtle dialectical differences between pro-government and pro-opposition groups.

  5. An Ethno-Experimental Exploration of the Foundations of Economic Norms in 16 Small-Scale Societies. Principal investigators: Jean Ensminger and Joseph Heinrich. Instructions and other information available at: http://www.hss.caltech.edu/~jensming/roots-of-sociality

  6. Interested readers can find the dictator game and the ultimatum game analysis available upon request.

  7. At the time of our study, the average monthly wage in Tajikistan was approximately 300 Somoni or \({\$}70\). Hence, subject earned on average more than a day’s wage.

  8. Our sample is overwhelmingly female, but this reflects the situation in Tajikistan, where many males are migrant workers, mostly in Russia. 30 % of our sample is male, which is slightly lower than the 40 % male sample in the Life in Transition Survey (LITS), a nationally representative survey. However, LITS was conducted in late Fall, at the end of the harvesting season, while our surveys and experiment were conducted in July, where demand for field agricultural labor was higher and males were consequently less accessible.

  9. This second measure of exposure to violence is coded 0 for all individuals in the Pamir region. There was no infighting in that remote region and respondents only report death of a household member, which presumably occurred outside the region.

  10. We do not cluster standard errors, as 17 villages is too little a number of potential clusters in order for clustered standard errors to perform well.

  11. A potential limitation of this strategy to deal with the selection into victimization bias is that trust and other prosocial preferences could be partly transmitted within the family. However, although there is a burgeoning theoretical literature on the vertical transmission of preferences since the work of Bisin and Verdier (2001) and Hauk and Saez-Marti (2002), and impressive empirical evidence on the local persistence of cultural norms that such vertical transmission within families entails, and trust in particular (Guiso et al. 2008; Tabellini 2008; Grosjean 2011; Nunn and Wantchekon 2011) there is still little evidence on whether this process is linear across generation or, in other words, how close social norms of children are to their parents’.

  12. This result could be explained by “guns or butter” models of conflict as a choice between production and appropriation, which suggest that the probability of victimization is linked to the resources of potential victims (Haavelmo 1954; Grossman and Kim 1995). If more educated people had more resources to be expropriated or were the object of envy, they might have been targeted during the conflict. In contradiction with this explanation however, the relationship between income and victimization is not robust and if anything, is negative. Another explanation for the relationship between education and victimization has to do with theories of political participation. Higher levels of education generate expectations, which, if unmet, can induce participation in demonstrations. These ideas have been popularized as the J-Curve theory (Davies 1974). In the context of the Tajik civil war, more educated people were probably more likely to join (or be suspected of joining) the protests that ignited clashes and retaliation by government forces.

  13. Other proxies of income, such as log of per capita expenditures, lead to similar results.

  14. All results are robust to the use of region fixed effects instead of village fixed effects. Results carry through and are generally more statistically significant.

  15. The authors estimate that a one standard-deviation increase in the importer’s trust toward the exporter raises export by 10 %. In our study, our second proxy for victimization is associated with a 0.53 standard-deviation decrease in local trust.

  16. The results of regressions controlling for interaction between the Same Village treatment and all covariates are not displayed here but are available upon request.

  17. The results are not included for space economy, but the coefficient is 0.172 and is statistically significantly different from 0 at the 1 % level.

  18. The first coefficient, \({\hat{\beta }}^{R}\), is obtained when only the victimization variables are controlled for. The second, \({\hat{\beta }}^{F}\), is obtained when the full set of observable characteristics are controlled for. The ratio is calculated as: \({\hat{\beta }}^{F}/\left( {{\hat{\beta }}^{R}-{\hat{\beta }}^{F}} \right) \).

  19. Here, we first run a regression in which we regress our village level measure of polarization on the physical distance to Afghanistan and to the Ferghana valley and we use the predicted values to classify our villages above or below the (predicted) median. We then run independent regressions of the effect of individual victimization in high or low (predicted) polarization, controlling for village fixed effects in Columns 4 and 8.

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Acknowledgments

The previous title of this paper was; “Civil War, Social Capital and Market Development; Experimental and Survey Evidence on the Negative Consequences of Violence”. We would like to thank Alexandra Ghosh, Lexi Russel and Azicha Tirandozov for outstanding assistance in carrying out the experimental work and data collection. We are grateful for their comments and suggestions to Eli Berman, Stefano Della Vigna, Dan Friedman, Oded Galor, Avner Greif, Phil Keefer, Craig McIntosh, Ted Miguel, Dominic Rohner, Mathias Thoenig, Leonard Wantchekon, Rick Wilson, Amanda Wooden, Bruce Wydick, Yves Zenou, Fabrizio Zilibotti, and three anonymous referees, as well as participants at Bay Area Experimentalists workshop, Central Asia Studies Society (CESS) Conference, International Society for New Institutional Economics (ISNIE), Monash University, NBER Income Distribution and Macroeconomics workshop, Northeast Universities Development Conference (NEUDC), Pacific Conference for Development Economics (PacDev), Stanford Institute for Theoretical Economics (Experimental Economics segment), University of Delaware Title VIII conference, University of New South Wales, University of Queensland, and University of Zurich. We gratefully acknowledge financial support from the University of San Francisco and the United States Department of State’s Title VIII Program (administered by the University of Delaware).

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Correspondence to Pauline Grosjean.

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Cassar, A., Grosjean, P. & Whitt, S. Legacies of violence: trust and market development. J Econ Growth 18, 285–318 (2013). https://doi.org/10.1007/s10887-013-9091-3

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