Armed conflict and unemployment in Colombia: the role of US drug interdiction policy

The article explores the profound impact of armed conflict on Colombia's labor market, with a particular focus on the consequences of the US drug interdiction policy implemented in 1994. This policy disrupted the drug trade dynamics in the Andean region, leading to a surge in violence and internal displacement, primarily from rural to urban areas. The study employs the synthetic control method to estimate the counterfactual unemployment rate in Colombia, had the US interdiction policy not been implemented. The findings reveal that the high-intensity conflict following the policy raised Colombia's unemployment rate by approximately 4.3 percentage points over the period 1994–2014. Notably, the analysis highlights gender disparities, showing that women were more significantly affected by the conflict than men. The article delves into the mechanisms through which conflict impacts labor supply and demand, including forced displacement, reduced firm investments, and increased operational costs due to violence. It underscores the need for targeted policy interventions to mitigate the adverse effects of conflict on labor markets, such as enhancing the skills of displaced individuals and providing incentives for firms to hire them. The research contributes to the understanding of the unintended economic consequences of international policies and the differential impacts of conflict on gender-specific labor market outcomes.