World Development Vol. 38, No. 4, pp.

647–663, 2010
Ó 2009 Elsevier Ltd. All rights reserved
0305-750X/$ - see front matter
www.elsevier.com/locate/worlddev
doi:10.1016/j.worlddev.2009.11.015

Vulnerability of Victims of Civil Conflicts: Empirical Evidence

for the Displaced Population in Colombia
ANA MARÍA IBÁÑEZ
Universidad de los Andes, Bogotá, Colombia

and

ANDRÉS MOYA *
Universidad de los Andes, Bogotá, Colombia
University of California, Davis, USA
Summary. — Internal conflicts and the forced displacement often caused by such conflicts impose a heavy burden on the civilian pop-
ulation and greatly damage a community’s overall welfare. The present study employs a household-level survey administered to 2,322
Colombian displaced households to estimate changes in household welfare after displacement and to assess aggregate consumption levels
in destination sites. We also assess whether households are able to smooth consumption, and we analyze the strategies they are compelled
to adopt in order to cope. Our results indicate that victims of civil conflict face difficulties in generating income, are unable to rely on
usual risk-sharing mechanisms, and are forced to draw upon costly coping strategies in order to smooth consumption. The vulnerability
of displaced households, and the possibility of falling into poverty traps, highlight the need to design and implement specific policies for
victims of internal conflict in order to cope with the displacement shock.
Ó 2009 Elsevier Ltd. All rights reserved.

Key words — Latin America, Colombia, forced migration, consumption smoothing, economic welfare

1. INTRODUCTION
Internal conflicts impose a heavy burden on the civilian pop-
ulation. Armed groups attack civilians to expand their territo-
rial control, weaken their opponents’ popular support, and
increase their war loot. This results in a large number of the
population facing forced displacement, selective homicides,
extortions and kidnappings, among other acts of extreme vio-
lence. In particular, worldwide forced displacement has in-
creased significantly during the last two decades; while in
1990 the total number of displaced persons was approximately
20 million, in 2007 this number rose to 26 million. Since 2000,
this figure has increased by 21.2%. 1 Colombia contributes be-
tween 7.6% and to 15.1% to this figure, according to the source
used. 2
Displaced households face poor welfare conditions due to
their limited ability to generate income. Households are forced
to migrate hastily and are rarely able to sell their assets, which
are seized by armed groups, or abandoned. Families cease
deriving economic returns from productive assets and, since
assets are not sold, capital to invest in productive activities
in destination communities is seldom available. Employment
opportunities are scarce since displaced households often
come from rural areas, and their agricultural abilities are not
demanded in urban areas. Displacement also causes household
disintegration as some members are assassinated or recruited
by armed groups, while others might stay in their home towns
to protect assets. Women are sometimes obliged to become the
main breadwinners of the household and older children must
abandon schools to generate income.
Moreover, formal and informal mechanisms to smooth con-
sumption, which are limited for the rural households, are dis-
rupted severely for the displaced population, obliging them to
647
adopt costly strategies. Because assets are lost, access to finan-
cial markets is limited, social networks are disrupted, and
informal risk-sharing mechanisms are constrained. Thus, the
need to rely on costly strategies to smooth consumption is fre-
quent, and the displaced are faced with substantial risks of
falling into chronic poverty due to future shocks.
The long-term consequences of a sharp drop in consumption
may transcend the direct welfare costs stemming from income
losses (Morduch, 1995). Children from households that are
unable to smooth consumption may suffer health deterioration
(Behrman, 1988) and be unable to achieve an inadequate body
size (Foster, 1995). Households also adopt coping strategies
such as selling assets (Rosenzweig & Woping, 1993), adjusting
labor supply (Kochar, 1998), foregoing risky but profitable
activities to smooth income instead of consumption (Mor-
duch, 1994), and dropping children out of schools (Baez &
Santos, 2007; Jacoby & Skoufias, 1997). For displaced house-
holds, the limited set of available strategies may force families
to rely further on such strategies, deepening the negative im-
pact of drops in consumption.
The purpose of this paper is to examine welfare changes for
a specific set of victims of civil conflicts, and identify the
* Support from GDN, MICROCON, and USAID is gratefully acknowl-
edged. We express our gratitude to the following: the Colombian Bishop’s
Conference, Klaus Deininger, Pablo Querubin, and Andrea Velásquez,
our partners in this research project. Comments from Christine Binzel,
Tilman Brück, Miguel Jaramillo, Patricia Justino, Frank Laczko, Doug
Miller, Deepa Narayan, Miguel Orozco, Philip Verwimp, participants in a
CEDE Seminar at Universidad de los Andes, and those of five anonymous
referees, contributed to improve this paper. Final revision accepted: Oct-
ober 21, 2009.
648 WORLD DEVELOPMENT
impact of income-generation programs that aim to reduce
their vulnerability. Using data from a survey administered to
2,322 displaced households in Colombia, we first analyze
changes in consumption and labor income after forced migra-
tion with respect to origin site. To understand which house-
holds are better adapted to their new circumstances, we
estimate the determinants of consumption and income levels
in destination sites. Second, we investigate the vulnerability
of displaced households; in particular, we are interested in
establishing whether displaced households are able to isolate
consumption from variations in transitory income given their
limited access to informal and formal risk-sharing mecha-
nisms. Since all the households in our sample are subject to
the shock of displacement, our identification strategy relies
on detailed information on productive assets and labor income
before and after displacement, that allows us to account for
permanent and transitory income shocks respectively. Third,
we analyze the strategies used by households to mitigate the
displacement shock and avoid sharp declines in consumption.
Lastly, we evaluate if income generation programs are effective
in increasing income and consumption levels in destination
municipalities, improving the ability to smooth consumption,
and reducing the need to adopt costly strategies which seek to
compensate for income drops.
The contributions of the paper are twofold. On the one
hand, the paper provides empirical evidence to understand
the vulnerability of victims from civil conflicts and the poten-
tial welfare losses associated with such conflicts. These topics
are rarely researched due to the difficulties involved in collect-
ing micro-level data. Some noteworthy examples are the pa-
pers by Justino and Verwimp (2006) and Brück (2004a),
Brück (2004b), which explore the economic consequences of
war for households in Rwanda and Mozambique. These stud-
ies are however limited to a small geographical region and, to
our knowledge, this is the first paper that addresses the
economic vulnerability of victims of war, and evaluates
the effectiveness of programs especially designed to mitigate
the impact of civil conflict. Understanding the conditions of
victims of war is critical to craft policy programs aimed at mit-
igating the short- and long-term costs of conflicts. In particu-
lar, the probability that these households will fall into poverty
traps is considerable, and the long-term consequences of civil
conflicts may hinder economic development. On the other
hand, the paper evaluates the effectiveness of income genera-
tion programs specifically designed to improve the economic
conditions of displaced persons and mitigate the impact of
civil conflict on this segment of the population.
Results indicate that displaced households confront sizeable
welfare drops after forced migration. Declines in labor income
and consumption after the displacement shock are substantial.
Because formal and informal mechanisms to share risk are dis-
rupted by displacement, and were not widely available for rur-
al households to begin with, a considerable proportion of the
income shock is translated into household consumption. Fur-
thermore, the impact of income generation programs is limited
to a short period of time. Beneficiaries are able to expand in-
come for a few months, but aggregate consumption is unaf-
fected, hence reliance upon costly coping strategies persists,
and the impact of the program vanishes rapidly upon its com-
pletion. Thus, displaced households might experience high
welfare losses, and their vulnerability to future shocks may
push them into a poverty trap.
A word of caution is important. We should not attribute ob-
served welfare losses solely to forced migration. In order to
identify losses stemming from the civil conflict, we require a
control group that lives in rural areas under the usual risk
exposure to agricultural and idiosyncratic shocks but that
did not experience displacement and conflict. As formal credit
markets and risk-sharing mechanisms are incomplete or even
non-existent in the rural areas of developing countries, rural
households in general face difficulties in coping with risk.
Thus, rural households might have also experienced drops in
income and consumption due to factors different from the civil
conflict. Only with an appropriate control group would we be
able to disentangle the welfare losses stemming from forced
displacement from those due to other sources of risk. Since
we do not have data for such a control group, we cannot assert
that the reduction in household welfare is due exclusively to
forced displacement. 3 Nonetheless, Ibáñez and Moya (2007)
found that displaced households enjoyed better living condi-
tions, higher educational attainment, and higher access to
informal risk-sharing mechanisms among others, and were,
in general, less vulnerable to poverty before the displacement
shock than other poor rural households. The shock of forced
displacement, then, not only leads to drops in income and con-
sumption, but also to the disruption of the few available risk-
sharing mechanisms, and consequently to a discernible vulner-
ability to chronic poverty.
The structure of the paper is as follows. Section 2 reviews
the economic literature regarding formal and informal mecha-
nisms to smooth consumption. In Sections 3 and 4 we present
a brief overview of civil conflict and forced displacement in
Colombia, and of the data we use in this paper, respectively.
The empirical strategy and results are described in Section 5.
Section 6 concludes.
2. CONSUMPTION SMOOTHING: FORMAL AND
INFORMAL MECHANISMS
According to the permanent income hypothesis, assets,
financial markets, and insurance mechanisms contribute to
isolate consumption decisions from income variations. Agents
rely on capital income, and in this way they are able to miti-
gate anticipated shocks and spread out consumption across
periods. On the other hand, credits, insurance, and informal
risk-sharing mechanisms contribute to coping with unforeseen
shocks. Since income variations are not translated into con-
sumption decisions, need and preferences determine the con-
sumption path, implying that consumption does not
necessarily track income over the consumption cycle (Deaton,
1992).
However, smoothing consumption is difficult when shocks
are not anticipated (Jacoby & Skoufias, 1997). Many house-
holds face borrowing constraints (Kohara & Horioka, 2006)
and access to formal insurance mechanisms is not widespread,
in particular in developing countries. Exclusion from financial
markets and insurance mechanisms leads some households to
resort to informal risk-sharing mechanisms (Fafchamps & Gu-
bert, 2007; Morduch, 1999). Despite the fact that there are
fewer alternatives and larger income variations in developing
countries, empirical evidence indicates that consumption is
remarkably smooth (Fafchamps & Lund, 2002).
Informal risk-sharing mechanisms constitute the main vehi-
cle employed to mitigate shocks in developing countries. In-
come drops are sometimes compensated by the sale of
assets, remittances, or informal credits (Fafchamps, Udry, &
Czukas, 1998; Rosenzweig & Stark, 1989). Reciprocal trans-
fers, like gifts and loans, are also common instruments used
by households in the rural areas of developing countries (Faf-
champs & Lund, 2002; Morduch, 2002). Lastly, intra-house-
hold decisions, such as reorganization of household units,
 VULNERABILITY OF VICTIMS OF CIVIL CONFLICTS
increasing labor market participation, and cutting meals, are
other strategies adopted by households (Fafchamps et al.,
1998; Jalan & Ravallion, 2001).
Informal risk-sharing mechanisms, however, are not com-
pletely efficient in reducing income risk (Fafchamps & Gubert,
2007; Foster & Rosenzweig, 2001; Ligon, Thomas, & Worrall,
2001; Townsend, 1994). The consolidation of reciprocally-
based mechanisms requires closely-connected individuals,
since altruism emerges by intimate personal contact, and re-
peated interaction increases the likelihood of reciprocity and
facilitates monitoring and enforcement (Fafchamps & Gubert,
2007; Fafchamps & Lund, 2002; Townsend, 1994). Because
these mechanisms arise within closely-connected networks,
income levels are similar and income fluctuations are highly
correlated; thus, risk-pooling is not complete.
Unforeseen shocks, when households are not properly in-
sured ex-ante, oblige households to adopt costly coping strat-
egies. The costs from adopting such strategies transcend the
short term and may perpetuate poverty. Evidence suggests
that income shocks and the inability to smooth consumption
have large effects on human capital accumulation because
school attendance becomes erratic (Baez & Santos, 2007; Jaco-
by & Skoufias, 1997). Also, children from households that are
unable to smooth consumption suffer from insufficient body
size, health deterioration and drops in nutritional outcomes.
As well as that, their labor participation increases (Baez &
Santos, 2007; Behrman, 1988; Foster, 1995; Jensen, 2000).
Developing countries are characterized by wider sources of
risk. Households confront health shocks, extreme weather
variations, pests, job shortages, violence and civil conflicts.
In particular, violence and civil conflict may have a severe im-
pact on the civilian population, and there is a significant like-
lihood poverty will be perpetuated once conflicts are brought
to an end. Nevertheless, the effects of conflicts on income,
the ability to smooth consumption, and vulnerability are
largely under-researched.
However, the scant evidence available suggests that the abil-
ity to smooth consumption for conflict victims is badly dimin-
ished. Assets losses are substantial, borrowing is extremely
restricted, and informal risk-sharing mechanisms fade away.
During conflicts, assets are destroyed, abandoned, or illegally
appropriated by armed groups (Brück, 2004a; Matowu &
Stewart, 2001). If assets fall below a critical level, their insur-
ance role is disrupted and unforeseen income variations trans-
late into a fall in consumption (Fafchamps et al., 1998).
Furthermore, financial markets may be disrupted by war
activities, or access for particular households may become dif-
ficult. Although informal risk-sharing mechanisms and non-
market activities may substitute disrupted financial markets
(Brück, 2004a), these may dissolve in the extreme conditions
brought about by conflict. Forced displacement, emergence
of mistrust in villages, and a widespread drop in village in-
come, are factors which reduce the possibility of achieving
the minimum conditions necessary for effective informal
risk-pooling.
As conflict hinders the ability to smooth consumption,
households are forced to resort to costly coping strategies,
reinforcing their vulnerability (Brück, 2004a). Selling assets,
adopting inefficient agricultural practices, and recurring to
subsistence farming are some of the strategies used by house-
holds during conflict (Brück, 2004b; Donovan, Bailey, Mpyisi,
& Weber, 2003). By trading off large returns for risk diversifi-
cation, households mitigate income shocks and mildly smooth
consumption. Evidence in war-torn countries shows that the
consequences of adopting these coping strategies are indeed
negative: malnourishment, poor nutritional status, drops in
649
lifetime earnings, and descents into chronic poverty (Alder-
man, Hoddinott, & Kinsey, 2004; Bundervoet & Verwimp,
2005; Justino & Verwimp, 2006). Because it is rarely possible
to resort to productive means, these conditions may push
households into poverty and create poverty traps (Justino &
Verwimp, 2006).
3. CIVIL CONFLICT AND FORCED DISPLACEMENT
IN COLOMBIA
Colombia has confronted several internal conflicts since its
independence from Spain in the beginning of the 19th century.
Two conflicts that occurred during the 20th century imposed a
particular heavy toll upon the civil population. Political strug-
gles between the two major political parties in the 1940s led to
the first conflict, known as La Violencia, which erupted vigor-
ously in 1948 after the assassination of a political leader from
the Liberal Party. Homicide rates soared throughout La Vio-
lencia and official figures estimate that 3,00,000 persons lost
their lives during this period (Echeverry, Salazar, & Navas,
2001). A power-sharing agreement negotiated in 1958 paved
the way for a peace deal and managed to end armed confron-
tations.
Although violence was moderate in the following two dec-
ades, the conflict never subsided. In the middle of the sixties,
rebel groups emerged in isolated regions of the Colombian ter-
ritory aiming to overthrow the government. The actions of
these groups, which consolidated in the seventies, comprised
sporadic attacks on government forces and the occupation
of rural towns (Echeverry et al., 2001).
The emergence of illegal drug cultivation and trade during
the 80s provided financial resources to rebel groups, and has
fueled the conflict ever since. Paramilitary groups emerged in
some regions of the country and sought to restrain expansion
of guerrilla groups as well as to protect land owners and drug
lords. Paired with drug funding, the presence of paramilitary
groups intensified and expanded the conflict throughout
Colombia’s territory (Gaviria, 2000; Thoumi, 2002).
Intensification of the conflict caused an escalating trend of
attacks against the civil population. These aggressions were
not a causal by-product of the war, but instead a deliberate
strategy of illegal armed groups to spread territorial control
and diversify funding sources. It is estimated that, by August
2009, forced displacement, as a consequence of the heightened
attacks of armed groups on the civilian population, had af-
fected more than 4.5 million people, corresponding to 10%
of the Colombian population, the second highest figure of
Internally Displaced Population (IDP) worldwide after
Sudan. 4 In addition, more than 90% of Colombia’s munici-
palities have seen the expulsion of members of their popula-
tion. 5
Illegal armed groups—left-wing guerrilla and right-wing
paramilitary groups—are responsible for most displacement
events in Colombia. By August of 2009, guerrilla groups
and paramilitary groups were responsible for 19.8% and
9.4% of the displacement events, respectively. 6 These groups
rely on violent aggressions against the civil population such
as death threats, massacres, selective homicides, kidnapping,
and forced recruitment, among other violent methods used
to force the population to migrate. As distinct from what
occurs in other countries, displacement in Colombia usually
takes place on an individual basis, and victims rarely mi-
grate massively 7: near 80.7% of the displaced population
migrated individually and only 19.3% of them migrated
massively. 8
650 WORLD DEVELOPMENT
Economic conditions of the displaced population in destina-
tion sites are extremely precarious. Household characteristics
are akin to those of vulnerable families: household size is large
(5.1 members in contrast to 3.9 for the Colombian popula-
tion), the proportion of women is greater than for the Colom-
bian population as a whole, mainly as a consequence of violent
deaths (54.0% vs. 41.8%), and the percentage of single house-
holds is large: 39.2% (Garay, 2008). Insertion in labor markets
is slow, labor conditions are poor, in particular for displaced
women, and more than 88% of the individuals employed are
not covered by labor contracts (Garay, 2008; UNHCR,
2003; UNHCR, 2004). Furthermore, discrimination against
the displaced population is an obstacle for participation in la-
bor markets (UNHCR, 2003). Although health coverage and
school enrollment is similar, or even better, than for poor
households, access to social protection programs is only
around 7.5% (Garay, 2008). Because conditions to generate in-
come are difficult, more than 98% of displaced households are
below the poverty line, and 74% are below the extreme poverty
line (Garay, 2008). Despite legal provisions to assist IDP and
several specific rulings of the Constitutional Court in this re-
gard, state programs reveal a high inclination of assisting
IDP with general policies for the poor population (UNHCR,
2007).
4. DATA AND INCOME-GENERATION PROGRAMS
(a) The data
We employ household data from Colombian displaced
households surveyed during the year 2004. Displaced house-
holds are defined as those forced to migrate from their munic-
ipality after being victims of attacks from illegal groups, or
those who migrated in order to prevent aggression from these
groups. In order to be legally recognized as a displaced house-
hold, and obtain access to state aid programs, households must
be registered in the State Registry for the Displaced Population
(RUPD by its Spanish acronym), an information system whose
purpose is to legally identify IDP. Not all displaced house-
holds, however, are registered in this system. To be registered
in the RUPD, individuals must declare, under oath, and inform
about the dates of displacement, the facts leading to their dis-
placement, and the households’ socio-demographic character-
istics. Once the declaration is completed, the State evaluates
within 15 days whether the declaration is valid or not.
The survey we administered comprises 2,322 displaced
households located in 48 municipalities and 21 departments. 9
The purpose of the survey is to characterize the migration pro-
cess, identify welfare losses from displacement, and evaluate
income-generation programs. We designed a treatment group
comprised of 769 displaced households who have received
training under USAID income-generation programs, and a
control group covering 1,553 displaced households non-bene-
ficiaries of these programs.
The control group is representative of the displaced pop-
ulation in Colombia, whereas the treatment group is repre-
sentative of displaced household beneficiaries of USAID
income-generation programs, a small subgroup of income
generation programs. The design of the control sample is
based on the RUT System, 10 an information system ap-
plied and managed by the Catholic Church which collects
socio-demographic information about displaced households
and their geographical location, an element of the utmost
importance, as it allowed enumerators to relocate house-
holds.
The RUT questionnaire is applied to displaced households
that request assistance in any of the 3,764 parishes of the Cath-
olic Church. When the sample was defined, the data contained
information for 32,093 households and nearly 150,000 people.
However, since the sample only contains information of dis-
placed households requesting assistance from the Catholic
Church, the data suffers from a potential bias. To correct this
bias, the control sample was divided into two sub-samples: (i)
794 RUT households; and (ii) 759 non-RUT households. The
process we implemented is the following: an initial stratified
sample was selected from the RUT sample and the geograph-
ical location was provided to enumerators. 11 Enumerators
from the Catholic Church located the RUT household and
administered the survey. Finally, for each RUT household
surveyed, a non-RUT household was located in the vicinity
and the survey was administered. A detailed comparison of
the RUT, and non-RUT sample; and the RUT sample and
the State Official Registry shows no statistically significant dif-
ferences.
We chose the RUT system instead of the government’s
RUPD as an initial basis to construct the control sample
for several reasons. First, the RUPD was only imple-
mented in 1999, while the RUT system was set up in
1995, and constitutes the first information system for
the displaced population in Colombia. In addition, the
RUT system collects more socio-demographic information
than the RUPD, and has a wider geographical cover-
age. 12
The treatment group, on the other hand, comprises ben-
eficiaries of USAID income-generation programs. A strati-
fied sample was designed whereby households were
randomly selected from a list of beneficiaries provided by
the three organizations implementing these programs in
the same municipalities of the RUT and non-RUT sam-
ple. 13
The survey elicits information regarding the migration pro-
cess, socioeconomic conditions before and after displacement,
land tenure, asset ownership, agricultural production, access
to government aid, and the desire to return. The migration
process is characterized in detail, including information about
the armed actors who caused displacement, triggers of dis-
placement, and reasons for choosing the reception municipal-
ity. Socioeconomic conditions, before and after displacement,
include household composition, health status, health services,
school enrollment, labor markets, labor income, asset owner-
ship, access to formal and informal credits, and participation
in formal organizations.
The estimation of consumption aggregates before and after
displacement merits a separate description. A problem may
arise when eliciting accurate information for consumption
aggregates before displacement. People’s recall regarding
consumption patterns before displacement may be vague,
and even faulty, thus reducing the accuracy of this type of
information. Consequently, we chose not to collect consump-
tion information before displacement directly in the survey.
Instead, we estimated the determinants for rural and urban
consumption using the Living Standards Measurement Sur-
vey (LSMS) carried out in Colombia in 1997. Results for
the estimates of rural and urban aggregate consumption are
presented in Appendix I. The predictive power of such esti-
mations is high (R-squares of 0.57 and 0.42 for urban and
rural consumption respectively). Once the determinants were
identified, we included the relevant questions of the LSMS-
1997 in the displaced households’ questionnaire to construct
these variables and predict consumption aggregates prior to
the displacement episode for each household. 14 Consumption
 VULNERABILITY OF VICTIMS OF CIVIL CONFLICTS
data after displacement, on the other hand, was collected di-
rectly by the survey.
(b) Income-generation programs
The main objective of income generation programs is to
help displaced households recover their production path.
These programs, offered by operators working for USAID,
offer labor training and courses for small enterprises’ man-
agement, as well as supplying seed capital to initiate
productive activities. Before selecting beneficiaries, wide-
ranging information campaigns are launched among poten-
tial beneficiaries. Potential beneficiaries, identified during
this first stage, must prove their condition as displaced
persons, and must have been recipients of Emergency
Humanitarian Aid (EHA). 15 If the number of potential
beneficiaries is larger than the available resources, priorities
during the selection process are given to households with
high dependency ratios, female-headed households or youn-
ger household heads. Program operators visit the homes of
potential beneficiaries to verify the conditions declared, and
to design a preliminary plan to support the displaced
households.
During the first stage, program operators select a group
of potential beneficiaries. This group must attend training
programs to sketch labor (or small enterprise) plans. Plans
are submitted to a committee which selects the group of
beneficiaries. Beneficiaries are then awarded a maximum
sum of US$500. Benefits of the program also include labor
training, small enterprise courses, or a combination of both,
as well as psychological support. By the end of the pro-
gram, labor plans are designed and beneficiaries are hired
by private firms for a short-term practice. Wages are funded
by the implementing organizations, and private firms can
decide whether or not they will hire the beneficiary after
three months, when the practice comes to an end. Detailed
small enterprise plans include a feasibility analysis, an
investment schedule, and a business plan. The treatment
sample we surveyed is representative of the beneficiaries se-
lected to participate in the final stage of the program; for
example after labor and small enterprise plans are submit-
ted.
Income-generation programs from government institutions
covered 13.5% of displaced households during the period dur-
ing 2006–08. 16 Although the programs evaluated in this sec-
tion are not official state programs, the structure of both is
similar.
5. VULNERABILITY OF INTERNALLY DISPLACED
HOUSEHOLDS
This section analyzes the vulnerability of the forcefully dis-
placed, stemming from drops in income and restricted access
to instruments for smoothing consumption, the adoption of
costly coping strategies, and the impact of income-genera-
tion programs. In order to achieve this objective, we esti-
mate: (i) drops in income and consumption; (ii) the
determinants of income and consumption in reception sites;
(iii) the ability of households to smooth consumption after
the fall in income due to forced migration; and (iv) the strat-
egies adopted by displaced households to smooth consump-
tion. Also, we explore whether or not income-generation
programs improve the capacity of households to smooth
consumption and reduce the need to rely on costly strate-
gies.
651
(a) Econometric analysis
Victims of civil conflicts, in particular displaced households,
face difficult conditions in destination sites, and are vulnerable
to future shocks as the available mechanisms to smooth con-
sumption are further restricted by the conflict shock. First,
migration is triggered often by violent aggression, which forces
households to leave hastily their hometown, restricting the
alternatives to sell and protect assets. Consequently, capital in-
come, one of the main instruments to smooth consumption, is
hardly an option. Losses in capital income cannot be compen-
sated with earnings in labor markets. The majority of dis-
placed persons arrive from rural areas, most of them are
previous land owners or possessors who were dedicated to
agricultural activities, and exhibit low education attain-
ment—all of which constitute characteristics that severely
hamper their ability to compete in urban labor markets. Not
surprisingly, after a year of displacement, unemployment rates
in reception municipalities are above those of the extremely
poor in urban areas (Ibáñez & Moya, 2006).
Second, access to financial markets is highly unlikely. By
moving to an unfamiliar location, traditional channels to ap-
ply for financial credits disappear. In addition, creditor pro-
files of displaced persons are risky for financial markets, as
the lack of assets suggests a nonexistent capacity to offer col-
lateral.
Lastly, informal risk-sharing mechanisms are restricted.
Contacts with social networks in their home town are watered
down as a consequence of migration. Also, a considerable pro-
portion of households are split up, since some members are re-
cruited by armed groups or assassinated during the events that
lead to their displacement, or because they abandon the house-
hold once they are established in the destination municipality.
The collapse of social capital, along with household disinte-
gration, greatly reduces the possibility of attaining informal
risk-pooling instruments.
Some consequences of civil conflicts upon displaced house-
holds are temporary, while others are long lasting. To some
extent, less access to formal and informal credits and deterio-
ration of social networks are short-term consequences of the
displacement shock. Evidence for the displaced population re-
veals a parsimonious recovery of access to credit markets,
whereas social capital is renewed after a year of settlement.
Nonetheless, despite having easier access to formal credits,
terms and conditions worsen, while access to informal credits
does not reach the levels attained before displacement. On the
other hand, the depreciation of agricultural skills, loss of pro-
ductive assets and disinvestment in human capital can easily
become a permanent consequence of the displacement shock.
The inability to smooth consumption imposes heavy costs
on displaced households and pushes them to adopt costly cop-
ing strategies. Drops in food consumption are widespread.
Older children interrupt school and participate in labor mar-
kets to generate income and prevent larger drops in consump-
tion. Lastly, families decide to strategically split up, as some
members return to their home town to protect assets and de-
rive returns from these assets.
We analyze welfare conditions of displaced households on
destination sites and the capacity of these households to
smooth consumption. We first estimate the determinants of
aggregate consumption and labor-income levels to identify
which households are better off in destination municipalities.
The empirical model states that income and aggregate con-
sumption levels for household i are determined by household
characteristics (Zi), labor occupation of household head (Li),
social capital variables (Si), characteristics of the migration
652 WORLD DEVELOPMENT
process (Mi), and a dummy variable denoting whether or not
the household is beneficiary of income-generation programs
(Gi). Labor income and aggregate consumption are defined by:
W i ¼ a0 Gi þ a1 Z i þ a2 Li þ a3 S i þ a4 M i þ ei ; ð1Þ
where Wi denotes labor income or aggregate consumption.
For aggregate consumption, a vector characterizing asset own-
ership in reception and origin municipalities (Ai) is also in-
cluded as an additional determinant because assets may help
to expand consumption.
Since access to income-generation programs is an endoge-
nous variable, we use access to Emergency Humanitarian
Aid—EHA—as an instrument. According to the official pro-
cedures, beneficiaries of income-generation programs are se-
lected among those households registered in the RUPD who
were recipients of EHA programs. Thus, access to EHA pro-
grams determines the probability of being a beneficiary of in-
come-generation programs, but should not affect either
consumption or income measures directly. The reasons for this
are that EHA is provided only during the first three months
after being registered in the RUPD, and the process of being
selected for income-generation programs takes several months
after EHA is effectively terminated. Moreover, aid is designed
for humanitarian purposes and, as such, it is not intended to
improve the income-generation capacities of households.
We also explore the vulnerability of displaced households,
measured in this case by their ability to smooth consumption.
The underlying theoretical model assumes agents transfer eco-
nomic resources across periods to maximize state contingent
utilities. The ability to transfer resources from one period to
another, and thereby to separate the consumption path from
earnings, depends on the level of assets as well as access to
credit and insurance instruments. Consumption is therefore
determined by needs and preferences and not by income vari-
ations (Deaton, 1992). The empirical approach to ascertain
whether households are able to smooth consumption, or
otherwise, needs to establish whether or not transitory income
variations translate into consumption variations.
Nonetheless, it is not easy to obtain precise measures of per-
manent and transitory income from survey data. An insightful
approach consists of estimating transitory income through
time-series information on idiosyncratic shocks, while perma-
nent income is estimated through a regression on household
characteristics, including land and assets (Paxson, 1992). In
this setup the regression to be estimated is described as fol-
lows:
D ln C i ¼ bT D ln y Ti þ bP D ln y Pi þ aX i þ Dei ; ð2Þ
where D ln C i represents the change in the log of consumption
between period t and period t  1 for household i, D ln y Ti de-
notes the change in the log of transitory income, D ln y Pi repre-
sents the change in the log of permanent income, Xi is a vector
of household characteristics to control for heterogeneity, and
Dei is a random term that captures the difference in time var-
iant unobservables before and after displacement. If house-
holds are able to fully insure against risks, bT ¼ 0, implying
that fluctuations in transitory income do not translate into
changes in the consumption paths. When complete consump-
tion smoothing is not possible, bT > 0.
The nature of our data, and the problem at hand, do not
allow us to estimate variations in transitory income using
time-series information on idiosyncratic shocks. In particular,
all the households in the sample were subject to the displace-
ment shock, and thus household variation regarding the
shock only comes in the form of the magnitude of this shock.
In this case, the displacement shock can be separated into
two components: a long-term component through the mas-
sive asset loss, and thus through the impact on household
permanent income. The other component, the one we are
interested in estimating, comes through the disruption of
risk-sharing mechanisms and poor labor conditions in labor
markets which presumably make households unable to
smooth consumption.
We use labor income and changes in the value of assets be-
fore and after displacement, as proxies for variations in tran-
sitory and permanent income respectively. We chose labor
income in local labor markets as a measure of transitory in-
come for two reasons: first, non-agricultural employment
was a secondary and highly volatile source of income in rural
areas, while urban employment after displacement is charac-
terized by precarious and variable conditions. Changes in per-
manent income, on the other hand, are incorporated by
including changes in the value of productive assets owned by
the household before and after displacement. Since displaced
households were mainly dedicated to agricultural activities,
landownership, and other assets were the main sources of per-
manent income, and the changes in assets as a consequence of
displacement gives us a sense of how permanent income has
been affected.
Changes in consumption are then regressed as a function of
changes in labor income, and household characteristics to con-
trol for observable heterogeneity. We include age and educa-
tion of the household head, whether that head be male or
female, and household size and time of settlement in destina-
tion sites as household characteristics. To control for time var-
iant unobservable heterogeneity caused by regional factors, we
include department controls.
Three set of regressions are estimated. First, a regression
where the change in consumption is estimated without con-
trolling for participation in income-generation programs,
(Eqn. (3)). In the second set of regressions, represented by
Eqn. (4), changes in income interact with participation in in-
come-generation programs. These are estimated using both
OLS and IV regressions, in which participation in income-gen-
eration programs is instrumented with access to EHA. Third,
the ability to smooth consumption may change as the time of
settlement in the destination municipality is extended. During
the first three months, displaced households are entitled to
humanitarian aid, which may be instrumental to prevent sub-
stantial drops in consumption. After humanitarian aid ends,
the vulnerability of displaced households may increase signif-
icantly. Thus, consumption smoothing may vary according to
the time of settlement in reception municipalities. To control
these changes over time, dummy variables for the time of set-
tlement are interacted with changes in labor income and par-
ticipation in income-generation programs (Eqn. (5)). These
are also estimated using OLS and IV regressions. The three
sets of regressions estimated are
DC ik ¼ a0 þ ak þ bT DI ik þ dDAik þ cZ ik þ Deik ; ð3Þ
DC ik ¼ a0 þ ak þ bT DI ik þ bTj ðDI ik  Benj Þ þ dDAik þ cZ ik þ Deik ;
ð4Þ
X
3
DC ik ¼ a0 þ ak þ bT DI ik þ bTjl ½DI ik  Benj  d l 
l¼1
þ dDAik þ cZ ik þ Deik ; ð5Þ
where DC ik , DI ik and DAik represent changes in consumption,
labor income, and productive assets before and after displace-
ment for household i located in department k. Department
 VULNERABILITY OF VICTIMS OF CIVIL CONFLICTS
fixed effects are included as ak , while Zik is a vector of house-
hold characteristics. Benj denotes a dummy variable which
corresponds to whether the household is a beneficiary or
non-beneficiary of income-generation programs. Time dum-
mies are incorporated as dl with l ¼ ½1; 2; 3, equal to one when
the time of settlement is less than three months (d1), between
three months and a year (d2), or more than a year (d3).
We conduct two robustness checks. First, since consump-
tion before displacement is not observed, we predict consump-
tion aggregates using two methods. The first prediction is
based only on the observed characteristics of households,
while the second prediction adds a random component, drawn
from a distribution with the same mean and variance of the
predicted error, to the predicted variable. We replicate this
estimation 500 times. The coefficient estimates using the
different predictions of consumption aggregate are robust
and stable; thus, we report results only for the first method.
Second, occupational choices may also have an effect on the
capacity to smooth consumption, and their omission could
bias the coefficient estimates. The coefficient estimates are
however robust to the inclusion of occupational choices. We
believe, however, that income-generation programs have a
strong influence on the sector and types of jobs of participants,
and consequently we report results without controls for occu-
pational choices to eliminate the possibility of having bias and
inconsistency in our estimators due to right-hand-side endog-
enous variables.
Finally, we analyze whether or not income-generation pro-
grams reduce the likelihood of resorting to costly strategies
to smooth consumption. We estimate probit regressions for
the probability of adopting strategies such as child labor and
household split up, and an OLS regression for the number
of days of schooling interruption. Changes in labor income,
household characteristics, social capital, asset ownership,
migration dynamics, and a dummy variable for beneficiaries
of income-generation programs are incorporated as determi-
nants of the adoption of such strategies. The probability for
household i of adopting strategy k is defined by
probðadopting strategy kÞi ¼ f ðd0 Gi þ d1 DI i þ d2 Z i
þ d3 S i þ d4 Ai þ d5 M i Þ; ð6Þ
where k is school interruption, child labor or household split
up. Estimate results for all the regressions defined in this sec-
tion are analyzed in the section that follows. We estimate OLS
and IV regressions for each strategy.
(b) Summary statistics and econometric results
This section presents the results from the analysis of welfare
losses, the ability to smooth consumption, and the strategies
adopted by the displaced population in Colombia. Our results
indicate that the economic impact of displacement is substan-
tial: asset losses are significant, conditions for generating in-
come are extremely difficult, and the ability to mitigate risks
is indeed limited. Thus, labor income and aggregate household
consumption plummet after displacement, households are un-
able to smooth consumption, and are compelled to adopt
costly coping strategies in an attempt to mitigate reductions
in income.
(i) Summary statistics
Table 1 shows the summary statistics for the whole sample
as well as for beneficiaries and non-beneficiaries of income-
generation programs. Forced displacement implies a signifi-
cant asset loss. Before displacement, the average value of
653
assets owned, without accounting for land, was US$10.035.
After displacement, this value fell to almost half: US$5.216.
The displacement shock, aside from significantly decreasing
victims’ asset holdings, condenses the asset distribution
around a lower mean and median. Over half of the households
had formal or informal land tenure, and had their land seized
by illegal armed groups or were obliged to abandon their land
as a result of displacement. Aggregate figures reveal that
1.7 million hectares have been lost as a consequence of forced
migration; a figure equivalent to 2.8 times the number of hect-
ares allocated by the Agrarian Reforms in Colombia during
1993–2002. 17 The abandonment of land by the displaced pop-
ulation implies a significant decline in agricultural production.
Idle land, on average, entails lifetime losses of US$23.457 for
households who pursued agricultural activities before dis-
placement.
The difficulty for displaced households to derive income
from agricultural activities is aggravated by the slow absorp-
tion of displaced persons in urban labor markets. First, unem-
ployment rates soar during the first months of settlement:
unemployment rates for household heads increase from 1.2%
in their places of origin to more than 50% during the first three
months after displacement. Although these rates descend to
14% after a year of settlement, displaced households fare
worse than the urban poor (Ibáñez & Moya, 2006).
Difficulties in finding jobs stem partially from the erosion of
the displaced population’s labor skills, and from their low edu-
cational levels. Forced displacement depreciates the produc-
tive skills of its victims; nearly all households come from
rural areas, where the majority was employed in agricultural
activities. In fact, almost 57.9% of household heads were en-
gaged in agricultural activities before forced migration. Fur-
thermore, average years of schooling for displaced
household heads, around 5.7 years of schooling, are lower
than those of the urban poor (Ibáñez & Moya, 2006).
Displaced households also face the disruption of formal and
informal risk-sharing mechanisms. Potential access to infor-
mal credit drops significantly and conditions for formal credit
worsen. After their displacement, only 12% of the households
had the opportunity to ask for loans from relatives, neighbors,
and friends, in comparison to 19.7% before displacement. Par-
ticipation in formal social networks is also disrupted.
Although involvement in social networks increases as the time
of settlement is longer, involvement in productive organiza-
tions decreases while participation in charitable organizations
increases.
Lastly, the migration process causes the fragmentation of
32.6% of the households, worsening their ability to generate
income. Nearly 9% of families loose household members,
and in many cases their household head, as a consequence
of displacement. Because the main bread-winners are no long-
er in the household, dependency rates and vulnerability to
poverty increases. Other households split up to diversify in-
come sources, return to their home town, and derive returns
from their assets. This strategy may reduce vulnerability by
providing additional income sources.
As a result of the circumstances described above, displaced
households face extreme difficulties in generating income in
reception sites. Overall, labor income per equivalent adult de-
clines by 50%. A household’s labor income per equivalent
adult plummets from US$994 per year before displacement
to US$394 after a year of settlement. As in the case of asset
holdings, the income distribution becomes less disperse after
displacement. To some extent, beneficiaries of income-genera-
tion programs recover earlier their ability to produce income
than non-beneficiaries, although, after a year of settlement,
654 WORLD DEVELOPMENT

Table 1. Summary statistics

Variable Non-beneficiaries Program beneficiaries Whole Sample
Aggregate consumption per equivalent adult in origin sites US$816.8 US$894.4 US$842.5
(US$4210) (US$4515) (US$4312)
Aggregate consumption per equivalent adult in destination sites US$545 US$603 US$564
(US$646) (US$664) (US$652)
Percentage of aggregate consumption for food expenses 65.20% 63.10% 64.50%
23.40% 24.50% 23.80%
Percentage of consumption donated 13.10% 6.30% 10.90%
27.10% 19.70% 25.10%
Labor income per equivalent adult in origin sites US$1012 US$956 US$994
(US$5012) (US$1954) (US44250)
Labor income per equivalent adult in destination US$288 US$519 US$364
(US$480) (US$543) (US$513)
Unemployment rates household head in origin sites 1.20% 1.00% 1.17%
Unemployment rates household first 3 months in destination sites 54.16% 33.33% 53.33%
Unemployment rates household after a year in destination sites 16.24% 10.40% 14.10%
=1 if HH head dedicated to agricultural activities in origin 58.92% 55.99% 57.95%
=1 if HH head dedicated to agriculture activities in destination sites 14.81% 11.85% 13.83%
=1 if HH head dedicated to commercial activities in destination sites 12.11% 24.09% 16.07%
=1 if HH head dedicated to industrial activities in destination sites 1.67% 3.39% 2.24%
=1 if HH head dedicated to construction activities in destination sites 5.86% 11.59% 7.76%
=1 if HH head dedicated to transport activities in destination sites 1.35% 2.34% 1.68%
=1 if HH head dedicated to services activities in destination sites 15.07% 19.14% 16.42%
=1 if HH had children working 14.80% 16.30% 15.30%
=1 if HH had children working and studying 14.80% 16.20% 15.30%
Average number of days children had to stop their education 132.81 174.63 147.03
Value of assets in origin US$10.035 US$10.553 US$9.518
(US$185) (US$368) (US$356)
Value of assets in destination US$5.216 US$6.345 US$4.329
(US$159) (US$291) (US$322)
Asset losses (durable goods and housing) US$4817 US$4464 US$4700
(US$7892) (US$9243) (US$8364)
= 1 if land owner or possessor 58.8% 59.00% 58.90%
Number of hectares owned before displacement 14.8 13.8 14.5
56.3 55.1 55.9
Net present value of agricultural losses US$22.852 US$24.732 US$23.475
(US$128.636) (US$111.896I (US$123.323)
Percentage of land after displacement 11.40% 9.55% 10.78%
=1 if walls of good quality—destination sites 60.98% 56.85% 59.61%
=1 if floors of good quality—destination sites 9.56% 9.82% 9.65%
=1 if connection to electricity—destination sites 89.60% 94.83% 91.34%
=1 if connection to water supply—destination sites 61.36% 79.46% 67.37%
=1 if owned house—destination sites 26.25% 35.79% 29.42%
Number of electronic devices—destination sites 2.32 3.16 2.6
Potential access to informal credits in origin sites 22.20% 14.60% 19.68%
Access to informal credits in origin sites 12.30% 10.30% 11.70%
Potential access to informal credits in destination sites 10.80% 14.30% 12.00%
Access to informal credits in destination sites 10.80% 7.70% 8.70%
Access to formal credits in origin sites 1.60% 2.60% 1.90%
Credit amount in origin sites US$984 US$719 US$866
(US$1689) (US$700) (US$1336)
Access to formal credits in destination sites 5.90% 30.60% 14.10%
Credit amount in destination sites US$609 US$680 US$660
(US$1202) (US$803) (US$931)
=1 if male household head—destination sites 61.75% 64.71% 62.73%
Number of adults between 18 and 65 years—destination sites 2.63 2.64 2.63
Household size—destination sites 5.16 5.17 5.16
Age—household head 43.01 41.65 42.56
=1 if household head belongs to ethnic minority 23.50% 25.65% 24.21%
Years of schooling—household head 5.62 5.78 5.68
Percentage of households facing fragmentation 30.80% 36.30% 32.60%
Household head no longer in the household 7.80% 11.30% 9.20%
Number of days since arrival to destination site 1,254 1,529 1,345
=1 if household migrated within the municipality 21.31% 2.97% 15.22%
= 1 if massive displacement 15.28% 15.25% 15.27%
 VULNERABILITY OF VICTIMS OF CIVIL CONFLICTS 655

Table 1—Continued
Variable Non-beneficiaries Program beneficiaries Whole Sample
=1 if HH lived in urban areas at origin site 34.00% 33.65% 34.18%
=1 if HH had friends or relatives in destination sites 71.18% 68.48% 70.28%
Whether any HH member participates in any local organization—origin sites 34.90% 26.60% 32.10%
Whether any HH member participates in any local organization—destination sites 31.55% 30.08% 31.06%

1,000 1,000

800 800

600 600
US $

US $
400 400

200 200

0 0
Less than three months Between three months and a More than a year Less than three months Between three months and a More than a year
year year
Lenght of settlement Lenght of settlement

Origin Destination Origin Beneficiaries Non Beneficiaries

Figure 1. Annual labor income per equivalent adult—before and after displacement. Whole sample, beneficiaries and non-beneficiaries. Source: Authors
calculations using EDHD-2004.

the difference between the two groups is not significant (Figure
1).
The limited capacity to generate income implies lower levels
of aggregate consumption. Forced displacement causes an
overall decline of 33% in aggregate consumption per equiva-
lent adult. In addition, consumption aggregates do not im-
prove over time: consumption drops sharply six months
after migration and, after a year of settlement, aggregate con-
sumption represents no more than 64% of the levels enjoyed
before displacement (Figure 2). Besides, almost 65% of aggre-
gate consumption corresponds to food expenditures, indicat-
ing the extreme vulnerability of this population.
Although beneficiaries of income-generation programs ap-
pear to be better able to smooth consumption during the first
months of displacement, this is not sustained over time. Once
these programs conclude, consumption levels for beneficiaries
are practically identical to those of non-beneficiaries (Figure
2). Non-beneficiaries of income-generating programs, on the
other hand, fare worse than the treatment group during the
first months, yet they are able to catch up after a year of set-
tlement.
The sources of consumption vary significantly over time.
During the first months, displaced households rely heavily
on assistance, and after a year some are purchasing most
of their consumption items. Beneficiaries purchase most of
their consumption items earlier than non-beneficiaries, but
after six months their purchasing capacity seems to weaken.
Nevertheless, after a year, beneficiaries rely more on pur-
chased goods compared to non-beneficiaries (95% of their
consumption bundle is purchased vs. 88% for non-beneficia-
ries).
Differences between beneficiaries and non-beneficiaries are
only statistically significant for a few exogenous variables.
First, because priority is placed upon vulnerable households
when resources are limited, households headed by a woman
due to the death of the previous head, those that disinte-
grated after displacement, or those with young heads, are
more likely to become beneficiaries. Over-representation of
vulnerable households among beneficiaries may bias the re-
sults downwards. Moreover, variables denoting social net-
works in origin, such as potential access to informal credit
or participation in formal organizations, are stronger for
non-beneficiaries than for beneficiaries. Presumably, social
networks act as informal risk-sharing mechanisms; thus,
households with stronger social networks in origin are less
in need of an approach to State programs for support. Lack
of social network is an additional dimension of vulnerability,
which may also bias the estimation downwards. Another

1,000 1,000

800 800

600 600
US $
US $

400 400

200 200

0 0
Less than three months Between three months and a More than a year Less than three months Between three months and a More than a year
year year
Lenght of settlement Lenght of settlement

Origin Reception sites Origin Beneficiaries Non Beneficiaries

Figure 2. Annual consumption per equivalent adult—before and after displacement. Whole sample, beneficiaries and non-beneficiaries. Source: Authors
calculations using EDHD-2004.
656 WORLD DEVELOPMENT

Table 2. Labor income and aggregate consumption determinants in receiving municipalities. Source: Authors calculations using EDHD-2004
Dependant variables Labor income Aggregate consumption
OLS IV OLS IV
=1 if beneficiaries of income generation programs 0.30*** 1.20*** 0.00 0.32
(5.370) (3.070) (0.070) (0.990)
Number of adults in the household 0.01 0.00 0.11*** 0.11***
(0.340) (0.200) (7.220) (6.950)
Age—household head 0.03*** 0.04*** 0.05*** 0.05***
(2.700) (3.240) (5.680) (5.210)
Age squared—household head 0.00*** 0.00*** 0.00*** 0.00***
(3.090) (3.610) (5.810) (5.150)
=1 if household belongs to ethnic minority 0.18** 0.18** 0.11** 0.12**
(2.240) (2.150) (2.140) (2.180)
=1 if female household head 0.10 0.06 0.07 0.08
(1.470) (0.920) (1.400) (1.500)
=1 if household head no longer in the household 0.14 0.22* 0.07 0.09
(1.320) (1.870) (0.880) (1.100)
Years of schooling—household head 0.02 0.02 0.02 0.01
(1.300) (1.030) (1.310) (1.230)
Years of schooling—spouse 0.04** 0.02 0.01 0.02
(2.440) (0.900) (0.680) (1.100)
=1 if HH head in agricultural activities in origin 0.23*** 0.23*** 0.08* 0.08*
(4.310) (3.850) (1.770) (1.820)
=1 if HH head in agricultural activities in destination sites 0.40*** 0.40*** 0.28*** 0.29***
(4.650) (4.340) (4.590) (4.830)
=1 if HH head in commercial activities in destination sites 0.44*** 0.35*** 0.19*** 0.24***
(6.380) (4.030) (3.130) (3.080)
=1 if HH head in industrial activities in destination sites 0.59*** 0.57*** 0.23** 0.24**
(4.480) (4.180) (2.010) (2.100)
=1 if HH head in construction activities in destination sites 0.21** 0.12 0.19*** 0.24***
(2.360) (1.170) (2.710) (2.870)
=1 if HH head in transport activities in destination sites 0.59*** 0.45** 0.24* 0.30**
(3.470) (2.400) (1.840) (2.130)
=1 if HH head in services activities in destination sites 0.27*** 0.24*** 0.22*** 0.24***
(3.440) (2.860) (3.740) (3.910)
=1 if HH member participating in local organization in destination sites 0.00 0.05 0.09* 0.08
(0.020) (0.820) (1.900) (1.550)
=1 if walls of good quality—destination sites – – 0.08* 0.07
(1.760) (1.470)
=1 if floors of good quality—destination sites – – 0.28*** 0.31***
(4.150) (4.080)
=1 if connection to electricity—destination sites – – 0.21*** 0.21***
(2.680) (2.600)
=1 if connection to water supply—destination sites – – 0.02 0.02
(0.420) (0.240)
=1 if owned house—destination sites – – 0.19*** 0.22***
(4.130) (4.230)
Number of household appliances—destination sites – – 0.03*** 0.04***
(3.330) (3.250)
Percentage of land after displacement – – 0.14*** 0.12**
(2.600) (2.000)
=1 if friends or relatives in destination sites 0.16*** 0.19*** 0.10** 0.09**
(2.930) (3.130) (2.360) (2.040)
Number of days since arrival to destination site 0.00*** 0.00* 0.00 0.00
(5.310) (1.720) (0.340) (0.950)
Number of days since arrival to destination site—squared 0.00*** 0.00* 0.00 0.00
(4.710) (1.890) (0.600) (1.030)
=1 if household migrated within the municipality 0.07 0.23 0.22*** 0.14
(0.840) (1.450) (3.180) (1.190)
=1 if massive displacement 0.02 0.04 0.12** 0.14***
(0.290) (0.400) (2.450) (2.530)
Constant 12.75*** 13.15*** 14.03*** 13.93***
(41.080) (35.230) (57.690) (50.750)
 VULNERABILITY OF VICTIMS OF CIVIL CONFLICTS 657

Table 2—Continued
Dependant variables Labor income Aggregate consumption
OLS IV OLS IV
Number of observations 1605 1605 1920 1920
R-squared 0.224 0.241
Includes household’s characteristics and departmental dummy variables.
*
Significant at 10%.
**
Significant at 5%.
***
Significant at 1%.

source of downward bias is the under-representation among
beneficiaries of households that migrated within the munici-
pality. Households may migrate within the municipality to
protect assets, such as land, and yet continue productive
activities. This additional source of income may also reduce
the need to resort to government programs.
(ii) Determinants of aggregate consumption and labor income
In order to identify which households are facing better
conditions in destination sites, we estimate the determinants
of consumption and labor income. Results from OLS and
IV regressions are shown in Table 2, while the first stages
for the instrumented regressions are presented in Appendix
II. First stage regressions indicate the instrument is indeed
highly correlated with participation in income-generation
programs. We find that labor income is higher for house-
holds who had contacts in destination sites, were settled for
a longer time, have younger household heads, and are em-
ployed. Labor income is also higher for beneficiaries of in-
come-generation programs. On the other hand, the more
vulnerable households appear to be ethnic minorities, those
in which a woman became the household head as a conse-
quence of displacement, and families employed in agricul-
tural activities before displacement. Income-generation
programs appear to be effective in increasing labor income
and reducing the dependence on assistance; nonetheless,
these increments are not enough to improve aggregate con-
sumption vis-à-vis non-beneficiaries.
Results for the determinants of aggregate household con-
sumption reinforce the results for labor income. We find that

Table 3. Consumption smoothing coefficients for displaced households

Variables (1) (2) (3) (4) (5) (6) (7) (8)
OLS OLS OLS OLS 2SLS OLS OLS 2SLS
Change in income 0.198*** 0.181*** 0.169*** 0.161*** 0.172*** 0.163*** 0.151*** 0.168***
(7.528) 7.396 (6.149) (4.404) (3.192) (5.587) (3.879) (2.801)
Change in income  beneficiaries 0.0260 0.0846
(0.564) (0.673)
Change in income  non-beneficiariesa – –

Change in income  time of settlement 0.0920*

below three months (1.704)
Change in income  time of settlement 0.0516
between three months and a year (0.757)
Change in income  time of settlement –
between above a year
Change in income  beneficiaries  time 0.151*** 0.111
of settlement below three months (2.901) (1.085)
Change in income  beneficiaries  time of 0.0128 0.166
settlement between three months and a year (0.107) (0.670)
Change in income  beneficiaries  time of 0.0351 0.0798
settlement above a year (0.711) (0.573)
Change in income  non-beneficiaries  time 0.0916 0.0710
of settlement below three months (1.329) (0.806)
Change in income  non-beneficiaries  time 0.0751 0.0150
of settlement between three months and a year (0.929) (0.128)
Change in income  non-beneficiaries  time
of settlement above a year
Controls
Household characteristics No Yes Yes Yes Yes Yes Yes Yes
Department dummies No Yes Yes Yes Yes Yes Yes Yes
Permanent income controls Yes No Yes Yes Yes Yes Yes Yes
Observations 1495 1495 1265 1265 1132 1265 1265 1132
R-squared 0.062 0.269 0.262 0.262 0.272 0.262 0.263 0.273
Robust t-statistics in parentheses.
a
Ommitted Variable.
*
p < 0.1.
**
p < 0.05.
***
p < 0.01.
658 WORLD DEVELOPMENT
consumption is greater for households that are better suited to
generate income, those which still control assets in their home-
town and are well-connected with formal organizations. On
the other hand, just as the results for labor income revealed,
the most vulnerable households would seem to belong to eth-
nic minorities.
However, three important differences emerge in contrast to
labor income determinants. First, time of settlement does not
exert any influence on aggregate consumption. Although con-
sumption drops significantly as a consequence of displace-
ment, it appears to stabilize at extremely low levels once
households settle in the destination site. Displaced house-
holds seem to rely heavily on donations during the first
months and, after a while, dependence on donations eases,
but consumption levels remain similar. Second, participation
in income-generation programs does not improve house-
holds’ consumption. Thus, income-generation programs ap-
pear to be effective to increase labor income during a short
time; yet, this expansion is temporary and does not contrib-
ute to increase consumption. Third, controlling assets in the
municipality of origin, and being able to extract rents from
exploiting it, contributes to expanding consumption and in
some way improving welfare conditions in the destination
site, reflecting the role that assets have for enhancing con-
sumption.
(iii) Consumption smoothing
In order to establish whether the disruption of risk-sharing
mechanisms impinges on the capacity of households to
smooth consumption, we first estimate regressions in which
changes in consumption per equivalent adult are regressed
against changes in labor income and household characteristics.
Coefficient estimates for OLS and IV estimations for the dif-
ferent specifications are presented in Table 3. Columns 1 cor-
respond to estimates for Eqn. (3). In order to check the
robustness of our results, we first estimate regression with no
controls, and then we gradually include household character-
istics, department controls and permanent income controls;
columns 4 and 5 correspond to Eqn. (4), while columns 6, 7,
and 8 correspond to Eqn. (5).
Our results indicate that displaced households are not able
to smooth consumption. When no controls are included, the
coefficient for the change in income is statistically significant
and equal to 0.198. Once household characteristics, depart-
ment controls, and controls for permanent income are in-
cluded, the coefficient estimate decreases to 0.169, but
remains significant, revealing that variations in labor income
translate into variations in aggregate consumption. If controls
for permanent income are not included, the coefficient esti-
mate for labor income picks up the effect partially. The mag-
nitude of the coefficient for changes in labor income is
significantly high, especially when compared to this coefficient
for poor households in Colombia (0.03) and Nicaragua (0.07)
(Barrera & Pérez-Calle, 2005). However, our results are similar
to those found for rural villages in South India (Morduch,
2002; Ravallion & Chaudhuri, 1997), in which the coefficient
denoting consumption smoothing ranges between 0.15 and
0.33.
Presumably, displaced households recover some of their
ability to smooth consumption over time by expanding access
to financial markets and risk-sharing mechanisms. Coeffi-
cients estimates when labor income changes are interacted
with dummy variables for time of settlement show a decline
from 0.255 for households recently displaced, to 0.163 for
households settled for more than year (Table 3, column 6).
However, it is striking to note that households settled for
longer periods are still unable to fully ensure their consump-
tion levels. Indeed, the coefficient of income changes is still
significant, and higher than the one for Colombian urban
poor in general.
Moreover, income generation programs only contribute to
smoothing consumption during a short time span. Results
for beneficiaries and non-beneficiaries of income-generation
programs reveal that these programs are not effective in
helping households to smooth consumption overall. The
coefficient estimate for the interacted term is not significant
nor in all cases positive, both in the OLS and in the IV
specifications (Table 3, columns 6 and 7). When we compare
consumption smoothing for beneficiaries and non-beneficia-
ries by length of settlement, we find that income-generation
programs improve the ability to smooth the consumption of
beneficiaries settled for less than three months of forced dis-
placement, yet beneficiaries are not able to isolate consump-
tion from variations in transitory income. When we
instrument participation in income-generation programs,
the coefficient becomes insignificant (Table 3, columns 6
and 7).
These results reinforce the hypothesis that income-genera-
tion programs offer a temporary relief, but their impact van-
ishes over time when households are forced to rely on their
own sources to provide consumption. However, a word of
caution is necessary before drawing definite conclusions about
income-generation programs. First, targeting of income-gener-
ation programs prioritizes vulnerable households. Although
we are including household size, and the fact that a household
is female-headed, as controls on vulnerability, some unob-
served variables that are difficult to control, such as depression
or post-traumatic stress, may be causing an underestimation
of the impact. Second, we are only capturing short-term effects
on consumption and labor income; yet households, due to pre-
cautionary behavior, may have directed revenues from in-
come-generation programs to savings or to asset
accumulation. Indeed, Chen et al. (2006) and Ibáñez and
Moya (2009) find that beneficiaries of these programs prefer
to invest program gains on savings or asset accumulation as
precautionary behavior.
(iv) Strategies to smooth consumption
The consequences of sharp declines in consumption, and
the difficulty of smoothing consumption, are factors which
force displaced households to adopt costly strategies. Some
households distribute their members between their home
town and the destination site as a strategy to diversify in-
come sources and continue exploiting assets: 21% of house-
holds reported that a member now resided in their home
town. On the other hand, secondary schooling is interrupted
frequently and young children are obliged to contribute to
income-generating activities. Thus, school attendance is low-
er in destination communities than in their home town, de-
spite having a larger supply of educational services in the
former. In almost 16% of the households surveyed, children
contribute to income-generation activities, driving children to
interrupt their education for approximately 147 days on
average.
As mentioned in Section 5.a, we analyze whether or not in-
come-generation programs reduce the likelihood of resorting
to costly strategies in order to smooth consumption. Follow-
ing Eqn. (6), we estimate probit regressions for the probability
of adopting strategies such as child labor and household split
up, and, in addition, we estimate an OLS regression for the
determinants of school interruption. Results for these estima-
tions, shown in Tables 4a and 4b, reveal that being a benefi-
 VULNERABILITY OF VICTIMS OF CIVIL CONFLICTS 659

Table 4a. Determinants of strategies to smooth consumption. Source: Authors calculations using EDHD-2004
Dependant variables Households splitting up Child labor
Probit IV Probit Probit IV Probit
* ***
Beneficiaries 0.17 2.13 0.09 1.92***
(1.830) (8.940) (0.870) (3.250)
Number of observations 1600 1605 1598 1605
Pseudo R2/R2 0.1471 – 0.1121 –
Includes household’s characteristics and departmental dummy variables.
*
Significant at 10%
***
Significant at 1%

Table 4b. Determinants of strategies to smooth consumption. Source: Authors calculations using EDHD-2004
Dependant variables Days of school interruption
OLS IV OLS IV
Beneficiaries 42.16 432.54 – –
(1.310) (0.550) – –
Beneficiaries  aged between 7 and 12 years – – 28.87 720.18
– – (0.740) (0.790)
Beneficiaries  Aged between 12 and 18 years – – 49.977 706.714
– – (1.310) (0.790)
Number of observations 789 789 789 715
R-squared 0.187 – 0.187 –
Includes household’s characteristics and departmental dummy variables.

ciary of income-generation programs reduces the likelihood of
having to split up the household, but these programs are not
an effective mechanism to keep children in schools, nor do
they lead to a decrease in child labor as a strategy for smooth-
ing consumption. Furthermore, participation in these pro-
grams does not contribute to reducing the time span in
which children interrupt school attendance. These results are
not surprising and are consistent with the outcomes described
in the paragraphs above. Because the effectiveness of income-
generation programs is limited and also because, since they are
temporary, their impact soon ceases to have any effect, the
beneficiaries still face harsh conditions once the programs
ends. Foreseeing these harsh conditions, displaced households
may simply diversify income sources by participating in in-
come-generation programs and by simultaneously adopting
strategies such as taking their older children out of school.
6. CONCLUSIONS
This paper contributes to an understanding of the vulnera-
bility of victims from civil conflict to potential economic
shocks. We collect a representative sample of forcefully dis-
placed households in Colombia in order to identify the impact
of the conflict shock, and the vulnerability of households. We
measure the vulnerability of displaced households by their
ability to smooth consumption. In particular, we are interested
in establishing whether or not displaced households are able to
isolate consumption from variations in transitory income.
Since all households in our sample were victims of the dis-
placement shock, our model accounts for different channels
through which the displacement shock translated into vulner-
ability and poverty. To do so, we used two components: a
long-term component through the massive asset loss, and thus
through the impact on household permanent income; and a
transitory-income component that controls the disruption of
risk-sharing mechanisms and poor labor conditions in labor
markets, which presumably make households unable to
smooth consumption. Our paper focuses on the immediate
consequences of forced displacement through this second
channel.
Results show that welfare losses for victims of civil conflict
are large and their vulnerability is a source of concern.
Evidence for forced displaced persons in Colombia reveals
significant drops in consumption and labor income, substantial
asset losses, harsh conditions in destination sites, and a severe
disruption of risk-sharing mechanisms. Thus, to avoid further
drops in consumption, displaced households rely on costly cop-
ing strategies, such as distributing members between their
home town and the destination site in order to diversify income
sources, interrupting school assistance for older children, and
increasing participation of older children in labor markets.
We recognize, moreover, that there are limitations to the
effectiveness of programs intentionally designed to promote
income generation and reduce state dependence among the
displaced population. Our results indicate that income-gener-
ation programs offer a temporary relief for beneficiaries, but
the impact is not sufficient to increase consumption and to
prevent households from adopting costly strategies. The
impact of the programs seems to vanish rapidly, and welfare
levels of beneficiaries end up being similar to those of non-ben-
eficiaries. Over time, both groups are unable to recover the
capacity to generate income and their previous welfare levels.
However, the impact of the programs might be underesti-
mated, since we only concentrate on short-term evaluation
and some unobservables denoting vulnerability are difficult
to control. Further analysis of these topics would be useful.
The consequences of internal conflicts, therefore, go beyond
the short-term adjustment costs analyzed above. Asset loss,
the impossibility of generating sufficient income, and the adop-
tion of costly strategies entail long-term costs for displaced
households, who will most probably become victims of
chronic poverty.
The need to design and implement specific policies for vic-
tims of internal conflict is conclusive. These policies should
provide mechanisms to prevent substantial welfare losses
660 WORLD DEVELOPMENT
and to create conditions for a sustainable income-generation
process. Protection and recuperation of assets, the fine-tuning
of income-generation programs, and promoting access to
financial markets, are crucial elements to consider while
designing such policies.
Protection and recuperation of assets contributes to ensur-
ing acceptable consumption levels. A legal framework must
be established to protect land and other assets abandoned as
a consequence of forced displacement, and local people
should be trained to apply this legal framework. Although
Colombian legislation has several provisions to protect the
land of displaced households, the implementation of this
legislation has been extremely slow and largely ineffective.
On the other hand, compensation schemes should be dis-
cussed during peace talks in order to devise post-conflict
reparation programs.
The impact of income-generation programs should not
end at the moment of a particular program’s completion.
In order to guarantee long-term benefits, programs should
identify instruments to facilitate access to formal employ-
NOTES
1. Internal Displacement Monitoring Center. Retrieved October 10th,
2008 from http://www.internal-displacement.org.
2. Two data sources estimate the number of displaced population in
Colombia: Acción Social, the State Institution in charge of IDP, and
CODHES, a human rights organization. We do not pretend in this paper
to discuss which source is most appropriate. However, it is convenient to
mention that Acción Social seems to underestimate the number of IDP’s in
Colombia while CODHES overestimates it. These discrepancies are
explained by differences in the definition of a displaced household, and
the systems employed to collect the data. In this paper, we use the official
figures as reported by Acción Social. We wish to thank an anonymous
referee for raising this point.
3. Internal Displacement Monitoring Center. Retrieved September 30th,
2009 from http://www.internal-displacement.org.
4. Acción Social, Forced Displacement Statistics. Retrieved September
30th, 2009 from http://www.accionsocial.gov.co.
5. ibid.
6. According to Colombian Legislation, massive displacement occurs
when more than 10 households, or 80, persons migrate together, not
necessarily from the same town.
7. ibid op cit.
8. Departments are the territorial administrative units in which the
country is divided, similar to States in the United States of America. Each
department is composed of different municipalities, which in turn are the
smallest administrative units in Colombia.
9. The RUT system receives its name from the Biblical character Ruth,
an immigrant who arrived in ancient Israel.
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662 WORLD DEVELOPMENT

APPENDIX I. CONSUMPTION REGRESSIONS FOR URBAN AND RURAL AREAS

See Table A1.

Table A1. Determinants of log consumption aggregates – Urban and rural areas. Source: Authors calculations using LSMS-199
Variable Rural consumption Urban consumption
Number of children between 2 and 13 years 0.0314 0.0436
(4.36)*** (5.61)***
Number of adults 0.097 0.0882
(12.83)*** (14.21)***
Age household head—years 0.0057 0.0033
(7.17)*** (4.74)***
=1 male household head 0.1018 0.1105
(3.15)*** (5.51)***
Years of education household head 0.0144 0.0138
(3.44)*** (6.65)***
Years of education spouse 0.022 0.0105
(5.59)*** (5.26)***
=1 if HH owns home – 0.2927
=1 if HH head in agricultural activities 0.0588 0.0113
(1.70)* 0.24
=1 if HH head in industrial activities 0.0750 0.0099
1.33 (0.34)
=1 if HH head in construction activities 0.1610 0.0111
(2.15)** (0.27)
=1 if HH head in trade activities 0.2206 0.1235
(4.10)*** (4.55)***
=1 if HH head in transport activities 0.2149 0.1248
(2.56)** (3.28)***
=1 if HH head in service sector 0.1741 0.0509
(3.72)*** (1.99)**
=1 if land owner or possessor 0.1066 –
(4.47)***
=1 if owned a vehicle 0.4724 0.4264
(7.87)*** (15.97)***
Number of tractors 0.1994 –
(4.70)***
Number of electrical appliances 0.1195 0.1176
(18.11)*** (29.81)***
Number of livestock 0.1533 –
(5.72)***
=1 if wall materials are of good quality – 0.094
=1 if floor materials are of good quality – 0.1699
=1 if connected to water supply – 0.0499

=1 if connected to electricity – 0.188

=1 if connected to water sewage – 0.2486

=1 if more than 3 persons per room – 0.1863

Constant 14.4143 14.0303

(114.80)*** (187.75)***
Number of observations 3751 5367
R-squared 0.4271 0.5733
Includes municipal controls.
*
Significant at 10%.
**
Significant at 5%.
***
Significant at 1%.
 VULNERABILITY OF VICTIMS OF CIVIL CONFLICTS 663

APPENDIX II. FIRST STAGE REGRESSIONS PROBABILITY OF BEING A BENEFICIARY OF INCOME

GENERATION PROGRAMS: LABOR INCOME AND AGGREGATE CONSUMPTION IV ESTIMATION

First stage regressions Consumption Labor income

F 21.72 19.55
Prob > F 0 0
R-squared 0.3723 0.3554
Coefficient on AHE 0.1282*** 0.1425***
(6.65) (6.52)
Number of observations 1920 1605

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