Peace Spurs Investment: Evidence from Credit Microdata in Colombia by Luis Martinez

Join us for another event in the Political Economy and Political Science Institutions (PEPSI) Seminar Series, Autumn Term 2023.

Luis Martinez, from the Harris School of Public Policy at the University of Chicago, will present their research on Peace Spurs Investment: Evidence from Credit Microdata in Colombia.

Abstract

We study the causal effect of peace on investment using a unique administrative dataset from a large bank serving small agricultural producers in Colombia. Our difference-in-difference strategy exploits the 2016 peace agreement between the Colombian government and insurgent group FARC, combined with pre-existing differences in FARC exposure across municipalities. We document an increase in business loan applications in municipalities with high FARC exposure that leads to a 21% increase in the monthly value of disbursed credits. This effect only materializes after the peace deal is finalized, despite a sizable reduction in violence during the preceding negotiations period. Higher demand for credit cannot be explained by changes in supply-side factors but is concentrated in municipalities with high market access. Additional loans fund long-term investments, with no change in loan misuse or delinquency rates.

This seminar will be held in the Economics Common Room, 5B.307, on Wednesday 8th November 2023 at 11.00am. This event is open to all levels of study and is also open to the public.