Portfolio Choice and Violence in Civil War in Rural Burundi

This paper challenges the idea that farmers revert to subsistence farming when confronted with violence from civil war. Macro-economic evidence on economic legacies of civil war suggests that civil wars, while obviously disastrous in the short run, do not need to have persistent effects on long term economic outcomes. New micro-level studies are ambiguous about the impact of civil war for welfare. Several studies find long lasting negative effects, particularly through reduced human capital formation while others for example report increased participation in collective action programs and the emergence of local institutions. We investigate to what extend individual incentives for investments are affected by civil war. Using several rounds of (panel) data at the farm and community level, we find that farmers in Burundi who are confronted with civil war violence in their home communities increase export and cash crop growing activities, invest more in public goods, and reveal higher levels of subjective welfare evaluations. We interpret this in the light of similar recent micro-level evidence that points to post-traumatic growth effects after (civil) war fare. Our results are confirmed across specifications as well as in robustness analyses.