Journal of Development Economics 131 (2018) 15–27

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Journal of Development Economics

journal homepage: www.elsevier.com/locate/devec

Violence, psychological trauma, and risk attitudes: Evidence from victims of

violence in Colombia
Andr
es Moya
Economics Department, Universidad de los Andes, Calle 19A #1–37E, Bogot

a, 111711, Colombia

A R T I C L E I N F O A B S T R A C T

Keywords: Traumatic experiences can alter individuals' behavior and deplete their ability to make economic decisions. In this
Risk aversion article, I analyze the effects of violence on risk attitudes. For this purpose, I sampled a group of victims of violence
Violence in Colombia and collected data on the severity and temporal proximity of their exposure to violence and on their
Psychological trauma symptoms of psychological trauma. I find that more severe violence brings about higher levels of risk aversion in
Colombia the gains and ambiguity domains but that the behavioral effect is not permanent. I also find that the effect is
driven by severe anxiety disorders, which is consistent with studies in psychology. The results suggest that
violence can affect poverty dynamics through a behavioral channel. (JEL: D1; C9; O1; I1; I3).

Wars, civil conflicts, and large-scale episodes of violence can leave a
legacy of poverty. Although macro-oriented studies find that war-torn
countries and regions are able to recover in the long term (Brakman
et al., 2004; Davis and Weinstein, 2002; Miguel and Roland, 2011),
recent microlevel evidence indicates that individual victims can be thrust
into poverty through a variety of mechanisms that stem from violence,
including loss of income and productive assets, forced displacement,
child malnutrition, and interruption of education.1 Identifying such
channels is fundamental to designing suitable policies that help victims of
violence to recover.
In this article, I analyze whether the experience of violence induces
higher levels of risk aversion and thus whether it affects poverty dy-
namics through a behavioral channel. This hypothesis is motivated by
research on the psychological consequences of violence and on the effects
of emotions on behavior, both of which I discuss in detail in the following
section. Studies in clinical psychology establishes that victims of violence
may suffer an array of psychological disorders, including chronic anxiety,
depression and posttraumatic stress disorder (Kessler et al., 1995; Vinck
et al., 2007; Yehuda, 2002). Importantly, psychological trauma follows a
dose-response relationship—that is, the experience of more severe and
recent violence brings about more severe symptoms of trauma (Doctors
Without Borders, 2010; Mollica et al., 1988). Moreover, laboratory
studies in social psychology have found that anxiety and fear induce
higher levels of risk aversion, whereas anger has the opposite effect
(Lerner and Keltner, 2001; Lerner and Tiedens, 2006; Lerner et al., 2015;
Raghunathan and Pham, 1999).2 Taken together, these two strands of
literature suggest that the experience of severe and recent violence can
bring about higher levels of risk aversion by inducing anxiety disorders.
Hence, violence can alter victims' economic decisions and contribute to
their vulnerability to poverty through a behavioral channel.
To analyze the effects of violence on risk aversion, I sampled a group
of 284 victims of violence in Colombia. As I describe in detail in section 2,
I collected data on individual decisions made during an incentivized lab-
in-the-field experiment; the severity and temporal proximity of
household-level exposure to different violent events and atrocities, such
as assassinations, massacres, and threats; and symptoms of nine different
psychopathologies, including two anxiety disorders. Subjects in the
sample experienced intense violence, which brought about severe psy-
chological consequences: 94 percent of them were either directly
victimized or belong to a household in which a member was victimized,
80 percent experienced a multiplicity of violent events, and more than 30
percent were experiencing severe symptoms of anxiety and phobic anx-
iety at the time of the lab-in-the-field experiment.
Using this detailed data, I find that violence affects risk attitudes at
the intensive margin, and that such effect is driven by severe symptoms of
phobic anxiety. First, more severe and recent violence, the two factors
that mediate psychological trauma, bring about higher levels of risk
aversion over gains and ambiguity. Second, the effect is not permanent
but rather fades out with time. Third, the observed behavioral effect is
explained by the way in which more severe and recent violence brings

E-mail address: a.moya@uniandes.edu.co.

1
See Blattman and Miguel (2010) and Ib
an~ ez and Moya (2016) for reviews of the literature.
2
To analyze the role of emotions on behavior these studies have followed an experimental approach that relies on the administration of random psychological primes, which are meant
to induce specific emotions prior to the behavioral task.

https://doi.org/10.1016/j.jdeveco.2017.11.001
Received 10 January 2017; Received in revised form 19 October 2017; Accepted 8 November 2017
Available online 10 November 2017
0304-3878/© 2017 Elsevier B.V. All rights reserved.
A. Moya
about severe symptoms of phobic anxiety, which in turn induce higher
levels of risk aversion. Taken together, these results are consistent with
the hypotheses that follow the research outlined above on the dose-
response relationship between violence and psychological trauma, and
on the role of emotions on risk aversion. I discuss the results in detail in
Sections 3 and 4.
This research builds upon a growing body of literature on the
behavioral consequences of violence, and especially upon two recent
articles that have analyzed the effects on risk aversion (Bauer et al., 2014;
Bellows and Miguel, 2009; Blattman, 2009; Callen et al., 2014; Cassar
et al., 2013; Cassar et al., 2014; and Voors et al., 2012).3 In Burundi,
Voors et al. (2012) found that a higher share of deaths at the community
level over the 1993–2003 period induced less risk aversion, but that the
severity of the exposure to violence at the household level did not bring
any significant effects. In Afghanistan, Callen et al. (2014) combined
administrative and individual-level reports on terrorist attacks over the
2002–2010 period with random psychological primes, as in the studies in
social psychology cited above. Their results indicate that the exposure to
violence at the district or individual level did not lead to significant ef-
fects on subjects' preference for certainty. However, when subjects had
been exposed to violence and were asked to recall fearful experiences,
their certainty premium increased. In other words, Callen et al. found
that the exposure to violence increased the susceptibility to being
emotionally primed.
While my results seem at odds with those of Voors et al. (2012) and
Callen et al. (2014), a closer look at the samples of each study indicates
that we answer closely related but different questions. For instance,
Voors et al. (2012) and Callen et al. (2014) explore the effects of violence
among residents of war-torn districts or communities who may or may
not have been victimized.4 By contrast, I analyze the effects of violence
among victims who suffered a multiplicity of violent events and were
experiencing severe symptoms of psychological trauma. This distinction
allows us to reconcile the coexistence of seemingly opposite results and to
understand that these two bodies of work complement each other—this
is, we provide evidence of the effects of violence on risk attitudes for
populations that experienced a different level of violence.
I thus contribute to the literature in the following ways: First, I pro-
vide evidence on the behavioral responses for victims of violence that
complements the findings of previous studies. Second, I highlight that the
behavioral effects of violence emerge at the intensive margin as a func-
tion of the severity and temporal proximity of the experience of violence.
Finally, I provide a rigorous measurement of the psychological conse-
quences of violence, which allows me to identify the channel that ex-
plains how it influences risk attitudes. To the best of my knowledge, this
is the first article that links data on risk attitudes and symptoms of psy-
chological trauma and that tests the channel through which violence
affects behavior.
The results outlined above portray the causal effects of violence if the
patterns of selection governing violence did not change over time. Hence,
the results would be invalidated only if armed groups had originally
targeted less risk-averse subjects but then switched their strategy and in
recent years targeted more risk-averse subjects. This is unlikely. None-
theless, I have implemented different strategies to demonstrate that the
patterns of violence were exogenous to ex-ante risk attitudes. First,
during fieldwork I sampled the victims in regions that were being con-
tested over the period of analysis and where anecdotal evidence
3 dose–response relationship: more severe and recent episodes of violence
Related research has also analyzed the effect of genetics, financial shocks, natural
disasters, and stress on risk attitudes, impatience, and prosocial behavior (Cesarini et al.,
2009; Cameron and Shah, 2015; Castillo and Carter, 2011; Cassar et al., 2011; Eckel et al.,
2009; Kandasamy et al., 2014; Malmendier and Nagel, 2011; Page et al., 2014).
4
For example, in Callen et al. (2014), 24 percent of the subjects reported that there was
a successful terrorist attack in their neighborhood in the previous 5 years. Likewise, in
Voors et al. (2012), 34 percent of the subjects reported that someone in their household
had been victimized at some point between 1993 and 2003–at least 7 years before the
field experiment.
16
Journal of Development Economics 131 (2018) 15–27
suggested that violence toward civilians was indiscriminate (Centro
Nacional de Memoria Hist
orica [CNMH], 2013). Second, in the empirical
analysis of this paper, I follow Bellows and Miguel (2009) and demon-
strate that the variations in the severity and temporal proximity of
violence were not correlated with observable ex-ante characteristics.
Third, I analyze the robustness of the results on a subsample of victims
who were victimized en masse in the crossfire of armed combat and for
whom the severity of violence was as good as exogenous. Finally, by
testing the psychological mechanism, I demonstrate that the results are
not driven by unobserved heterogeneity but rather by the psychological
consequences of violence. Taken together, these strategies allow me to
overcome the methodological difficulties inherent in the study of
violence and to provide a picture of the behavioral consequences of
violence that is consistent with research in psychology.
The results of this article have important implications for policy
design and for future research. First, they suggest a different channel
through which violence can affect poverty dynamics and emphasize the
need to incorporate mental health programs into the aid packages for
victims of violence, internally displaced persons (IDPs), and refugees.
Second, they demonstrate that risk attitudes are not a stable and exoge-
nous preference. In doing so, the results speak to the research in
behavioral economics that contests the canonical models of behavior
under uncertainty (Ledoux, 1998; Loewenstein, 2000; Loewenstein and
Lerner, 2003). I conclude and discuss these implications in section 5.
1. Violence and psychological trauma in Colombia
Colombia has been ravaged by violence since the late 1940s. The
origins of the modern conflict can be traced to La Violencia (1948–1958),
a period of civil violence triggered by political disputes and tensions
between landowners and peasants. Despite the signing in 1958 of a peace
agreement between the two main political parties, violence persisted in
rural areas, and different guerrilla and paramilitary groups emerged soon
after. Since the mid-1980s, violence toward civilians escalated as these
groups clashed throughout the country in struggles for the control of
territories suitable for producing and trafficking illegal drugs and
extracting natural resources. Significant changes have occurred during
the last decade: paramilitary groups were demobilized in 2006; neo-
paramilitary factions fought to control regions previously under para-
military control; and the Colombian government and the Revolutionary
Armed Forces of Colombia (FARC) signed a peace agreement in 2016.
Although the Colombian conflict has been categorized as low in-
tensity, 8.3 million civilians have been victimized since 1985, including
7.3 million IDPs (National Victims Unit, n.d). The majority of these IDPs
were forced to migrate from rural to urban areas. The number of IDPs in
Colombia is the highest in the world (United Nations High Commissioner
for Refugees [UNHCR], 2016) and represents 15 percent of the country's
population, making IDPs the most visible group of victims in Colombia.
Violence and displacement bring about disturbing consequences and
can drive victims into poverty. Victims suffer a severe loss of physical,
social, and human assets, and these losses undermine their ability to
generate income (Ib
an ~ ez and Moya, 2010a, 2010b). Traumatic episodes
of violence and displacement also have profound psychological conse-
quences, including psychopathological levels of anxiety, depression, and
posttraumatic stress disorder (Doctors Without Borders, 2006; Londo~ no
et al., 2012; Richards et al., 2011; Shultz et al., 2014). While the sus-
ceptibility to psychological trauma varies among individuals as a func-
tion of their psychological and social resources, it also follows a
increase the likelihood and severity of symptoms of trauma (Mollica
et al., 1998). For instance, the incidence of chronic anxiety in Colombia is
2.6 times higher for victims than for bystanders (Doctors Without Bor-
ders, 2010).
The prevalence of anxiety among victims of violence in Colombia
suggests that violence can induce higher levels of risk aversion. This idea
is, of course, at odds with the canonical models of behavior under
A. Moya
uncertainty. According to such models, decisions are driven solely by a
cognitive process in which individuals address the desirability and like-
lihood of uncertain outcomes based on predetermined and exogenous
risk preferences (DellaVigna, 2009; Loewenstein, 2000). However,
research in social psychology has demonstrated that decisions result
instead from an interplay between cognitive and emotional inputs and
are often driven by the individual's emotional state (Ledoux, 1998;
Loewenstein and Lerner, 2003). Moreover, these studies find that fear
and anxiety bring about higher levels of risk aversion, while anger has the
opposite effect (Lerner et al., 2015; Lerner and Keltner, 2001; Lerner and
Tiedens, 2006; Raghunathan and Pham, 1999). Hence, risk aversion is
not a stable preference but is rather an attitude that varies according to
different emotional states.
In the laboratory, the effect of emotions on risk attitudes has been
established using random primes to induce specific emotional states. This
is precisely the approach of Callen et al. (2014), who, in addition to
collecting data on exposure to violence, implemented random recollec-
tions of fearful experiences. In the context of victims of violence, changes
in risk attitudes should be instead explained by psychological trauma,
which triggers a series of processes that affect individual behavior,
especially under circumstances of stress and uncertainty. These include
physiological changes in the brain, the inhibition of emotional regula-
tion, and the disruption of cognitive and socio-emotional functions
(American Psychiatric Association, 2013; Kessler et al., 1995; Mcewen
and Sapolsky, 1995; Yehuda, 2002).
Two hypotheses follow: First, since psychological trauma is mediated
by the severity and temporal proximity of violence, risk attitudes should
follow a similar dose–response relationship—that is, more severe and
recent violence should lead to higher levels of risk aversion. Second, we
should observe shifts towards higher levels of risk aversion among vic-
tims of violence who experience severe symptoms of anxiety disorders.
2. Sample selection and data
Between January and July 2011, I conducted fieldwork in the de-
partments of Bolivar, C

ordoba, and Sucre, in Colombia's Atlantic region,
and Tolima, in the Central region, where I sampled a group of victims of
forced displacement. I focused on IDPs because their displacement was
triggered by multiple atrocities and violent events and, as discussed
above, they constitute the most visible group of victims of violence
in Colombia.
2.1. Sample selection
The sample was designed in two steps: First, I selected the four de-
partments above, noting that these areas had experienced increasing
levels of violence since the early 2000s and that the patterns of violence
had been driven by struggles between armed groups for the control of
three geographical corridors.5 Consistent with the dynamics of civilian
victimization in civil conflicts (Kalyvas, 2006), anecdotal evidence sug-
gested that the patterns of violence were indiscriminate in the rural areas
near these contested corridors (Human Rights Watch, 2010; Instituto de
Estudios para el Desarrollo y la Paz [Indepaz], 2011; National Ombuds-
man's Office, 2009).6 Hence, I conducted fieldwork in these departments
5
In the Atlantic region, several neo-paramilitary groups emerged after the paramilitary
peace demobilization in 2006. These groups clashed over control of the Nudo del Paramillo
and Montes the María—two corridors with valuable lands and favorable conditions for the
illegal drug trade (Human Rights Watch, 2010; Indepaz, 2011). In the Central region, the
Colombian military intensified its operations against the FARC in 2004. The FARC
responded by retreating to the Ca~ non de las Hermosas—a corridor in the Central Andes that
facilitates the movement of troops and the trafficking of illegal drugs to the Pacific Ocean
(National Ombudsman's Office, 2009).
6
Former combatants acknowledge that armed groups in these regions viciously and
indiscriminately victimized civilians as a strategy of war to spread fear among the pop-
ulation and undermine their opponents' popular support. By doing this, armed groups
were able to control such strategic and contested regions (CNMH, 2013).
17
Journal of Development Economics 131 (2018) 15–27
to minimize concerns that violence was targeted.
Second, I used administrative data from the National Victims Unit to
identify the municipalities of residence of victims who had been dis-
placed from the vicinity of the above corridors. Initially, I identified three
departmental capitals and six municipal centers. Yet, due to increasing
levels of violence, I was only able to visit two of the departmental capitals
and two of the municipal centers.7
I followed a protocol that addressed some of the challenges of con-
ducting fieldwork in contexts of on-going civil conflict and with victim-
ized populations. These include interacting with populations who may
want to remain anonymous or may have low levels of trust towards
outsiders, ensuring the safety of both participants and enumerators, and
collecting sensitive information on the experiences of violence. Below I
describe the process followed to contact the sample of victims, and in the
following subsection I discuss the protocol to collect sensitive informa-
tion and protect enumerators and participants.
In each location, I reached out to the local government officials,
ombudsmen and Catholic priest. All of them had close relations with the
communities and the latter two were recognized and trusted by victim-
ized and displaced communities. These actors organized community
meetings in which they explained the project's broad objectives. Then, I
read an informed consent script in which I asked individuals if they were
willing to answer questions on their experiences of violence, and high-
lighted that their participation was voluntary and they could opt-out at
any time. Finally, I screened interested attendees to ensure that they had
been displaced from the rural areas near the three geographical corridors
mentioned above, and I invited one-third of them to participate.
Subjects who declined the invitation –around 7 percent of those
invited– had been victimized and displaced in the previous six months
and it is thus likely that they were suffering from higher levels of trauma.
In such case, the patterns of self-selection would imply that I sampled the
relatively less traumatized and that the resulting bias would work against
the hypothesis that violence induces psychological trauma and risk
aversion. Nevertheless, the rate of non-response is low considering the
context. Moreover, as I discuss shortly, I was able to sample victims who
experienced various degrees of violence at different times, and who were
experiencing high levels of psychological trauma at the time of the data
collection.8
Following the protocol above, I sampled 284 victims of violence who
had been displaced from the rural areas of 34 different municipalities and
resided in one of the four urban locations where fieldwork was con-
ducted. Importantly, the sample includes 132 individuals from nine
different villages where the populations had been victimized and dis-
placed en masse. Eight of these villages were victimized by cross fire from
armed groups that were engaged in combat in the village boundaries. In
such episodes of en masse victimization, the severity of the victimization
is thus exogenous to individual and household characteristics.9 Fig. A1 in
the Appendix shows the geographical distribution of the sample, iden-
tifying the municipalities from which IDPs were displaced and the in-
tensity of displacement across Colombian municipalities to highlight how
the regions where I conducted fieldwork had been heavily affected
by violence.
7
Departmental capitals: Sincelejo and Ibagu
e in the departments of Sucre and Tolima,
respectively. Urban centers: Tierralta and Montelíbano in the department of C
ordoba.
8
The low rate of non-response, and the ability to effectively interact with victims of
violence, is likely explained by the support of the local ombudsmen and Catholic priests,
by providing subjects with an opportunity to pick the survey date that worked better for
them during a three-week window, and by conducting all fieldwork at the local church,
which constituted a safe and private environment.
9
The characteristics of massive displacements are illustrated by the emblematic
massacre of Bojay
a, Choc
o, where guerrilla and paramilitary forces clashed in this town of
approximately 1000 inhabitants. Guerrilla forces launched improvised mortars toward the
paramilitaries, and one of these exploded in the local church, where over half of the
population was taking shelter. Of this population, 119 civilians were killed, 98 more were
wounded, and all survivors forcibly migrated days later (CNMH, 2013).
A. Moya
2.2. Data
Data collection took place as follows: in each location enumerators
first administered a household survey at the local church during
weekdays. After all surveys were completed, subjects were invited to a
weekend group activity. There, enumerators administered the victim-
ization questionnaire and psychometric scale in private, and I then led
an incentivized lab-in-the-field experiment to elicit risk attitudes.10
Both stages of the data collection took place at the local church to
guarantee safe, private, and trusted environments for respondents and
enumerators. I describe each instrument below. For descriptive pur-
poses, and to contextualize the empirical strategy, I provide sample
statistics for an arbitrary stratification of the sample: individuals whose
households experienced a number of violent events below or above the
median, who are identified as moderately or severely victimized,
respectively.
2.2.1. Household victimization questionnaire
At the beginning of the group activity, enumerators privately
administered a victimization questionnaire, which captured whether a
household member suffered different conflict-related violent events and
the number of times that each event had occurred in the last 10 years. The
data from such questionnaire allows me to measure the severity of
violence using the number of violent events suffered by the household,
and to use the number of years since the episodes of displacement as a
proxy for the temporal proximity of violence. While not all violent events
occurred at the same time, subjects stated that their displacement was
triggered by a peak in violence.11 The years since the episodes of
displacement therefore capture the temporal proximity of the moment
when violence was at its highest.
Eliciting information on victimization experiences has special ethical
considerations. In particular, the recollection of traumatic experiences of
violence could have induced strong emotional reactions and affected
participants. For these reasons, at the beginning of the weekend activity I
stressed that subjects did not have to answer any specific questions or
entire modules and that their participation was entirely voluntary. In
addition, prior to fieldwork, I received training in psychological
containment, anticipating that some subjects could be emotionally
affected throughout the different stages of fieldwork. Finally, in consul-
tation with the local ombudsmen and priests, I defined a protocol in case
any subject required special assistance. While no subjects required acti-
vating such protocol, I did have to provide emotional contention to 8
subjects after the victimization questionnaire.12
Table 1 presents sample statistics on the severity and temporal
proximity of violence and the incidence of different violent events.
Overall, the data highlights two main features of this article: namely, that
the sample focuses on victims of violence and captures considerable
heterogeneity in the severity and temporal proximity of violence—the
two factors that mediate psychological trauma. First, the data reveals that
all subjects had been displaced, 94 percent of them had suffered at least
one violent event. Second, subjects reported being exposed to an average
10
Sessions were conducted after the surveys were completed in each location to mini-
mize sharing of information regarding the experiments and to control for self-selection
based on the monetary prizes. This also minimized the time I spent in each municipal-
ity after communities learned that an outside researcher was handing out monetary prizes,
which was useful given that security conditions were not ideal. Sessions also elicited ex-
pressions of hopelessness regarding expectations of socioeconomic mobility (Moya and
Carter, 2014).
11
A different version of the victimization questionnaire inquired about the year in which
each event had occurred. During the pilot tests, such a level of detail significantly
increased the time of response, and subjects generally stated that most of the violence
occurred in the weeks before their displacement.
12
All of them decided to continue with the rest of the data collection and participate in
the lab-in-the-field experiment. In the discussion section, I address whether the victimi-
zation questionnaire implicitly worked as a priming mechanism, as in the psychology
literature and in Callen et al. (2014).
18
Journal of Development Economics 131 (2018) 15–27
of 8.31 violent events in the full sample and 7.64 in the sample of subjects
who were victimized en masse. For the full sample, the most frequent
events included being caught in the cross fire of armed combat (59%),
receiving threats (51%), suffering the assassination of a household
member (26%), suffering a violent attack (16%), and/or experiencing
and surviving a massacre (10%). For the subjects who were victimized en
masse, 87 percent of them reported that they had been victimized during
armed combat between two rival groups, supporting the idea that the
severity of the victimization is exogenous for this group. Third, the
average time between the victimization and the field experiment was 2.4
years for the full sample and less than a year for the victims of mass
violence; the latter includes 32 subjects who were victimized 10 days
before the data collection.
2.2.2. Psychometric scale
After the victimization questionnaire, enumerators privately admin-
istered a locally adapted version of the Symptoms Checklist 90 R (SCL 90-
R), which measured symptoms of nine different psychopathologies in the
three months prior to the field experiment.13 I chose the adapted version
of the SCL 90-R over other common scales of posttraumatic stress dis-
order since it captures symptoms of different disorders, including anxi-
ety,14 phobic anxiety,15 and hostility.16 Therefore, it allows testing for
the psychological mechanism through which violence affects behav-
ior—something that has not been analyzed in the literature.
Fig. 1 illustrates the distributions of symptoms of different disorders
for the full sample.17 On the one hand, the data in the figure confirm the
predictions from the literature in clinical psychology and indicates that
the psychological consequences follow a dose–response relationship: a
more severe exposure to violence brings about more symptoms of anxiety
and phobic anxiety and a higher score for the global severity index
(GSI).18 For instance, 40 and 34 percent of the subjects in the severely
victimized group score above the critical threshold for phobic anxiety
and anxiety disorders, respectively, and are therefore at risk of devel-
oping clinical psychopathologies. These figures are statistically different
from those from the moderately victimized group (25 and 32 percent).
For the massively displaced sample, the extent of trauma is much higher,
possibly because of the more recent exposure to violence (see Table 1 and
Appendix Table A1). Taken together, average levels for the two anxiety
disorders place the sample of victims of violence in the top 90th
13
The SCL 90-R has reliable psychometric properties and has been widely implemented
in developing countries and in conflict scenarios (Casullo, 2004). The scale inquires about
90 symptoms associated with psychological trauma, such as headaches, back pains, and
uneasiness among others, rather than asking directly about trauma. Responses for each
question are scaled from 0 to 4, indicating a range of no symptoms to daily symptoms in
the last three months. Scores on the relevant questions for each disorder are added and
divided by the total number of questions answered. For the global severity index, this
corresponds to all 90 questions. This score is converted into a T-score with mean 50 and
standard deviation 10 (Ti ¼ 10 þ 50  score). Cronbach alpha ¼ 0.94 indicates an
excellent internal consistency—the extent to which all items measure the same constructs.
14
Anxiety: Psychological state of distress and fear (Casullo, 2004). In moderate levels,
this is a normal reaction to stress, but it becomes a disorder when it exceeds certain levels.
Anxiety can be caused by many circumstances, including violence and poverty, among
others. Therefore, above-normal levels of anxiety cannot be exclusively associated with
exposure to violence and are also driven by the different circumstances brought about by
violence and displacement.
15
Phobic anxiety: Abnormal fear and behavior of avoidance of regular objects or situ-
ations. This disorder is characterized by intense fear that is triggered by an unthreatening
stimulus that brings about recollections of traumatic episodes (Casullo, 2004). Testimonies
of IDPs suggest that some of these stimuli included walking into public spaces or places
with large crowds or being in the dark, since these experiences triggered the recollection
of episodes of victimization. Hence, phobic anxiety seems to be more directly tied to the
episodes of violence than general anxiety.
16
Hostility: Thoughts, feelings, and actions characterized by the negative anger affect.
17
Table A1 in the Appendix reports the sample means for the continuous T-scores and
the percentage of subjects who scored above the critical threshold for each disorder in the
full sample and the sample of subjects who were victimized en masse.
18
Kolmogorov Smirnov tests indicate that the distributions of anxiety, phobic anxiety,
and IGS are statistically different between the moderately and severely victimized groups.
The distribution for the hostility disorder, in turn, is not different.
A. Moya Journal of Development Economics 131 (2018) 15–27

Table 1
Exposure to violence.

Full Sample Massively Victimized

Total Moderate Severe Total Moderate Severe

[1] [2] [3] [4] [5] [6]

Severity: # of violent events 8.31 2.07 16.73 7.64 2.34 15.09

[16.120] [1.239] [22.070] [11.520] [1.138] [14.980]
Temporal proximity: years since violence 2.40 2.32 2.51 0.94 0.85 1.06
[3.138] [3.072] [3.233] [1.241] [0.652] [1.749]
Victim of (%):
Combats 0.59 0.42 0.81 0.87 0.82 0.94
[0.494] [0.495] [0.395] [0.338] [0.390] [0.231]
Threats 0.51 0.40 0.68 0.29 0.18 0.43
[0.501] [0.490] [0.470] [0.453] [0.390] [0.499]
Assassinations 0.26 0.12 0.44 0.20 0.08 0.37
[0.439] [0.330] [0.499] [0.402] [0.271] [0.487]
Attacks 0.16 0.05 0.31 0.07 0.03 0.13
[0.367] [0.217] [0.464] [0.255] [0.161] [0.339]
Massacres 0.10 0.02 0.21 0.03 0.00 0.07
[0.300] [0.135] [0.408] [0.173] [0.000] [0.264]
Ordered to migrate 0.43 0.36 0.53 0.38 0.45 0.28
[0.496] [0.483] [0.501] [0.486] [0.501] [0.452]
Other 0.27 0.12 0.46 0.15 0.07 0.27
[0.443] [0.330] [0.500] [0.360] [0.250] [0.447]

Observations 284 162 122 132 76 56

Notes: Summary statistics on household-level exposure to violence. Columns 1–3 report sample statistics for the full sample, while columns 4–6 report statistics for subjects who were
victimized en masse. For each sample, the table reports the exposure to violence according to an arbitrary stratification of the data: whether the household was exposed to a number of violent
events that were below (moderate violence) or above (severe violence) the median number of violent events. Standard deviations are reported in brackets.

Fig. 1. Psychological Trauma. Notes: Kernel density estimates for the distribution of the Global Severity Index, and the Anxiety, Phobic Anxiety, and Hostility disorders using the data from
the SCL-90-R scale. As in the previous table, sample statistics are reported according to an arbitrary stratification of the data: whether the household was exposed to a number of violent
events that were below (moderate violence) or above (severe violence) the median number of violent events. The dotted vertical line depicts the critical level above which individuals are
at risk of developing clinical cases for each disorder.

19
A. Moya Journal of Development Economics 131 (2018) 15–27

Table 2 neuroticism—the predisposition to experience anxiety—explains risk

Lottery design. attitudes over gains but not over losses. For the latter, behavior is driven
Payoffs Gains Losses Ambiguity by the individual's cognitive ability rather than by any emotional influ-
Red Blue Red Blue Red Blue ence (see for example Rustichini et al., 2011). Hence, if psychological
trauma is indeed the underlying mechanism through which violence
Choice 1 13,000 13,000 7,000 7,000 13,000 13,000
Choice 2 10,000 19,000 10,000 1,000 10,000 19,000
induces changes in individual risk attitudes, we should not observe any
Choice 3 7,000 25,000 13,000 5,000 7,000 25,000 effects over the loss domain. On the contrary, if violence and psycho-
Choice 4 4,000 31,000 16,000 11,000 4,000 31,000 logical trauma do affect loss aversion it would suggest that other mech-
Choice 5 2,000 36,000 18,000 16,000 2,000 36,000 anisms are at play or even to spurious relationships.
Choice 6 0 38,000 20,000 18,000 0 38,000
To help subjects understand the experiment, each domain had a
practice round, lotteries were each depicted as an oval divided into one
Endowment 0 20,000 0
# of balls 5 5 5 5 3: 7 3: 7 red and one blue segment to indicate two outcomes per lottery, and
payoffs were displayed with pictures of the local currency. Subjects were
Notes: All payoffs are in Colombian Pesos (COP). At the time of the experiments, the ex-
change rate was approximately COP1.70 ¼ USD1.00. In the gains and losses task, outcomes told that they would be paid according to their decision in one of three
had an equal probability of occurrence and were determined by picking a ball from a bag domains, which was chosen at random at the end of the session. Earnings
containing five red and blue balls. In the ambiguity task, outcomes were determined by were then determined based on a blind selection of either a red or blue
picking a ball from a bag that included ten balls: three red balls, three blue balls, and four ball from a bag containing 10 balls.21 Subjects were paid according to the
balls that were blindly chosen from a bag containing 50 red and 50 blue balls.
red (blue) payoff in the lottery they chose.22
Fig. 2 reports the proportion of safe choices in each domain for the
same stratification of the data as before, while Appendix Table A2 reports
percentile of the national distribution.19 On the other hand, symptoms of the raw data. On average, the data in the figure indicates that subjects
hostility, which have been found to induce lower levels of risk aversion behave in conformity with the predictions from the literature—that is,
(Lerner and Keltner, 2001), are less severe and do not seem to vary ac- they are risk averse over gains and ambiguity, and risk seeking over
cording to the severity of the victimization. losses. The patterns of behavior, in addition, are in general consistent
with those of Cardenas and Carpenter (2013). Moreover, the data sug-
2.2.3. Elicitation of risk attitudes gests that higher levels of violence are associated with even higher levels
To measure risk attitudes, I implemented an incentivized lottery of risk aversion over gains and ambiguity, but also with more
design over the gains, losses, and ambiguity domains that follows from loss-averse choices.
Cardenas and Carpenter (2013). In each domain, subjects were offered
six lotteries and had to choose one of them. One lottery offered the lowest 2.2.4. Household survey
expected payoffs and zero risk, while the expected payoffs and variance As discussed before, the household survey was administered in pri-
gradually increased for the other lotteries. The choices during the vate in the weeks prior to the weekend activity above. The household
experiment thus revealed individuals' willingness to take risks: more survey captured detailed information on the current and retrospective
risk-averse individuals should choose lotteries with lower expected socioeconomic and demographic characteristics of subjects. Retrospec-
payoffs and less risk. Table 2 describes the lotteries, endowments, and tive questions were included to identify the characteristics of the
payoffs in each domain, which ranged from USD6.50 to household before the episodes of violence and to analyze whether they
USD17.00—approximately one to two days of off-farm wages. were associated with the severity of violence.
The experiment was designed in the following way: The gains Table 3 reports sample statistics and differences between the current
domain, included payoffs with an equal probability of occurrence and and retrospective characteristics of the subjects in the full sample (col-
measures standard risk aversion. Following the standard approach in the umns 1–3) and the sample of subjects victimized en masse (columns 4–6).
literature, the loss domain in this experiment included positive and In general, there are no significant differences between the current and
negative payoffs and a $20,000 endowment. Once the endowment is previolence characteristics of subjects who were moderately and severely
accounted for, expected payoffs are the same as for gains. Yet, because victimized, other than their age. To further demonstrate that the severity
payments are framed as losses, subjects should be loss averse—that is, and temporal proximity to violence are exogenous to ex-ante observable
they should be willing to take additional risks to preserve their endow- characteristics, I follow Bellows and Miguel (2009) and regress both the
ment (Kahneman and Tversky, 1979). Finally, in the ambiguity domain, number of violent events to which a household was exposed and the
neither the subjects nor the experimenter (myself) knew the first-order years since the peak of violence on a set of ex-ante household charac-
probability distribution. While payoffs were the same as before, ambi- teristics. Results confirm the inference from Table 3: neither the severity
guity regarding the first-order probability distribution should lead to nor the temporal proximity of violence were driven by previolence ob-
more conservative choices (Ellsberg, 1961; Hartley and Phelps, 2012).20 servables (see Appendix Table A3).
The experiment included the three dimensions describe above for two
reasons: First, because the literature consistently has identified different 3. Violence & risk aversion
behavioral patterns in each dimension—that is, lower willingness to take
risk over gains and ambiguity, but a higher willingness over losses. In this section, I estimate the effects of violence on risk attitudes over
Hence, by including the three dimensions, I can observe whether subjects gains and ambiguity and discuss the underlying assumptions for identi-
behave in conformity with such behavioral patterns and whether they fication. Except when noted otherwise, models are estimated using or-
understood the different tasks. Second, and perhaps more important, the dered probit models that rank choices from the safest (Lottery 1) to the
inclusion of the loss dimensions allows a falsification test of the under- riskiest (Lottery 6) and do not assume a specific utility function. A
lying conceptual framework. Studies in neuro-economics find that negative coefficient indicates a positive effect on the probability of

19
Reports from the National Mental Health Survey (2015) indicate that only 5.3 percent
of the Colombian population has suffered from severe anxiety disorders over the course of
their lives—a much lower percentage than that of the victims of violence surveyed here.
20
In this experimental design, it is not possible to identify separate parameters for gains,
loss, and ambiguity aversion. Instead, individual choices indicate the reduced-form will-
ingness to take risks under each domain.
21
In the gains and loss domains, the bag contained 5 blue and 5 red balls. In the am-
biguity domain, 10 balls were introduced into the black bag: three red and three blue balls,
and four balls blindly chosen from a bag containing 50 blue and 50 red balls.
22
See the appendices B & C for the graphical depictions of the lotteries in each domain
and the experimental protocol.

20
A. Moya
Fig. 2. Lottery Choices. Notes: Histograms of frequency of lottery choices in each domain for the moderately and severely victimized groups, as defined in Fig. 1. Lottery 1 corresponds to
the lottery with the lowest expected value and zero variance, while Lottery 6 corresponds to the lottery with the highest expected value and variance.
choosing the safest lottery and higher levels of risk aversion.
3.1. Results
To analyze the effect of violence on risk attitudes, I estimate the index
model 1, where I regress yihd —the lottery choice of individual i, from
household h, in the experimental domain d (gains; ambiguity)—on
Severityh , the standardized number of violent events to which household
h was exposed, Recencyh , the number of years since the episodes of
violence and displacement, and their interaction. The model includes a
t
matrix X i of current covariates, such as each subject's age and gender,
whether she is the household head, and the hypothetical earnings in the
corresponding practice round to control for their effect on risk atti-
tudes.23 The model also controls for a set of retrospective household
t1
characteristics X h , including the size of the household's landholdings
and whether a household member participated in local organizations or
worked in agriculture. These retrospective characteristics are included
since qualitative evidence finds that they are associated with the likeli-
hood of being victimized, although not with the severity of the victimi-
zation (CNMH, 2013). Finally, the model includes a region-specific fixed
effect νr and an error term εim , which is clustered at the current munic-
ipality of residence m and estimated through bootstrapping with 1000
repetitions.
23
In general, the coefficient of the hypothetical earnings in the preceding practice round
is always significant, and I also obtain robust results if I instead control for the color of the
ball or the actual choice in the practice round.
21
Journal of Development Economics 131 (2018) 15–27
0 t
yihd ¼ β1 Severityh þ β2 Recencyh þ β3 Severityh  Recencyh þ … Γ1 X i
0 t1
þ Γ2 X h þ νr þ εim
(1)
Columns 1 and 2 of Table 4 report the results of model 1 when I
exploit only the variation in the severity of violence over the gains and
ambiguity domains.24 The negative and significant coefficients indicate
that more severe violence leads to higher levels of risk aversion in both
domains. An increase of one standard deviation in the severity of
violence raises the probability of selecting the safest lottery by 5 and 7
percentage points over gains and ambiguity, respectively (see Appendix
Table A4 for the average marginal effects [AME]). These effects entail
considerable 13 and 21 percent changes in the proportion of safe choices
relative to the mean.
Columns 2 and 4 report the results of model 1 when I include the
temporal proximity of violence and its interaction with the severity of
violence. The data highlights two important results: First, the severity of
violence is again associated with more conservative choices in the gains
and ambiguity domains. For instance, an increase of one standard devi-
ation in the number of violent events raises the probability of selecting
the safest lottery by 7 and 10 percentage points over gains and ambiguity,
respectively (see Appendix Table A4). These effects account to changes of
17 and 32 percent in the proportion of safe choices relative to the mean.
24
For expositional purposes, all tables omit the coefficients for the covariates; full results
are available upon request.
A. Moya Journal of Development Economics 131 (2018) 15–27

Table 3
Sample balance.

Full Sample Massively Victimized

Total Moderate Severe Total Moderate Severe

[1] [2] [3] [4] [5] [6]

A. Current Characteristics
Age 41.46 39.96 43.46** 39.31 37.64 41.58
[13.463] [13.081] [13.753] [13.793] [12.766] [14.894]
Male (%) 0.39 0.37 0.41 0.39 0.40 0.38
[0.488] [0.484] [0.494] [0.489] [0.492] [0.489]
Hh head (%) 0.77 0.80 0.73 0.67 0.72 0.61
[0.421] [0.399] [0.446] [0.470] [0.450] [0.493]
Literate (%) 0.82 0.81 0.83 0.78 0.79 0.77
[0.387] [0.395] [0.379] [0.416] [0.410] [0.426]
Indigenous hh 0.17 0.15 0.19 0.19 0.15 0.25
[0.375] [0.362] [0.393] [0.393] [0.354] [0.437]
B. Exante (pre-violence) characteristics
Male-headed hh (%) 0.66 0.65 0.68 0.76 0.76 0.74
[0.474] [0.479] [0.469] [0.432] [0.429] [0.441]
Household size 4.89 4.98 4.78 4.96 4.88 5.07
[2.252] [2.294] [2.199] [2.113] [2.085] [2.165]
Highest level of education in hh (yrs) 8.36 8.52 8.14 7.69 7.42 8.05
[3.812] [3.689] [3.976] [3.793] [3.630] [4.006]
Hh member participated in an organization (%) 0.42 0.39 0.47 0.61 0.59 0.64
[0.495] [0.489] [0.501] [0.489] [0.495] [0.483]
Hh member participated in org. decisions (%) 0.45 0.46 0.43 0.73 0.78 0.65
[0.692] [0.708] [0.672] [0.798] [0.811] [0.783]
Hh head was off-farm laborer (%) 0.47 0.45 0.50 0.53 0.48 0.61
[0.500] [0.499] [0.502] [0.501] [0.504] [0.495]
Hh head worked in agriculture (%) 0.57 0.54 0.60 0.61 0.57 0.66
[0.496] [0.500] [0.492] [0.490] [0.499] [0.478]
Size of lands owned (ha) 8.48 6.67 10.88 5.99 7.18 4.38
[34.868] [16.005] [49.924] [13.674] [14.707] [12.075]

Observations 284 162 122 132 76 56

Notes: Sample balance using data from the household-level survey for the full sample (columns 1–3) and the sample of subjects who were victimized en masse (columns 4–6). Panel A reports
data on subjects' current characteristics while Panel B reports data on subjects' characteristics before the peak of violence and displacement. As in the previous tables, the data is stratified
according to the severity of the exposure to violence. Asterisks in columns 3 and 6 indicate the significance of the mean-difference test between the moderate and severe victimization groups.
Standard deviations are reported in brackets. *p < 0.1. **p < 0.05. ***p < 0.01.

Second, the coefficient on the interaction term indicates that the
behavioral effect vanishes over time and does so more quickly for those
who were severely victimized. The AME suggest that the effect of
violence on risk attitudes over gains and ambiguity vanish after
approximately 4 and 6 years, respectively. Since there are relatively few
subjects in the sample who had been victimized for over 5 years, these
two figures are imprecise and should not be taken at face value. Never-
theless, the key point is that they indicate that the effect of violence on
risk attitudes is not permanent.
In fact, note that after accounting for the temporal proximity of
violence, the AME for the severity of violence increases considerably.
Hence, the results of columns 1 and 3, which did not consider the het-
erogeneity in the temporal proximity of violence, correspond to average
effects of the severity of violence for subjects who were victimized at
different times. Once the temporal proximity of violence is incorporated
into the analysis, results indicate that the effect of violence looms larger
but also that it is temporal.25
3.2. Identification assumptions
The validity of the results of columns 1 and 3 hinges on the
assumption that the severity of violence was exogenous to ex-ante risk
25
These results are also robust under different specifications of model 1: first, if I
measure the severity of violence using a victimization index, which was constructed
through principal component analysis that weighs each event differently (Table A5 in the
Appendix); and second, if I drop subjects above the 95th, 90th, 85th, or 80th percentiles in
the distribution of violence to rule out the possibility that the results are driven by outliers
or by subjects who overstated their true experiences of violence. Results are available
upon request.
attitudes. The results would therefore be biased if the patterns of selec-
tion into violence were driven by individual or household characteristics
that were correlated with ex-ante risk attitudes. However, the analysis of
Table 3 and Appendix Table A3, discussed in the previous section, sug-
gest that the patterns of violence were not based on observables.
Of course, this does not rule out selection based on unobservables.
Yet, in contested territories such as those where I conducted fieldwork,
armed groups lack the information needed to target specific individuals.
For this reason, they turn to indiscriminate violence against civilians as a
strategy to obtain territorial supremacy (CNMH, 2013).26 The severity of
violence would thus be driven by unobserved selection if civilians made
themselves more conspicuous through certain behaviors, such as making
their preferences public, supporting a rival group, or gathering in public
spaces. In the context of war, such actions would characterize subjects
with low levels of fear and risk aversion. The resulting bias would work
against the hypothesis that violence induces higher levels of
risk aversion.
More importantly, the analysis of columns 2 and 4 relies on the
exogeneity of the severity and temporal proximity of violence and
therefore has weaker identification conditions. In particular, the results
would only be invalid if the patterns of selection changed over time. This
would occur if less risk-averse subjects had been victimized with a higher
severity earlier in time, while the more risk averse had been victimized
with a higher severity in recent years. This is unlikely.
Nevertheless, I analyze the robustness of the results on the sample of
26
According to reports from the Ombudsman's Office and different nongovernmental
organizations, this is a good depiction of conflict dynamics in the regions where data was
collected (National Ombudsman's Office, 2009; Human Rights Watch, 2010; Indepaz,
2011).

22
A. Moya Journal of Development Economics 131 (2018) 15–27

subjects who were victimized en masse. These subjects were victimized Table 4
with their entire villages in the crossfire of combat between illegal armed Violence & risk aversion.

groups, meaning that the severity of their exposure to violence is as good Ordered Probit Estimates Gains Ambiguity
as random. Results from Appendix Table A6 indicate that despite the [1] [2] [3] [4]
smaller sample, the severity of violence again brings about higher levels
# of violent events 0.14*** 0.19*** 0.24*** 0.32***
of risk aversion. For instance, an increase of one standard deviation in the (standardized) [0.022] [0.050] [0.052] [0.059]
number of violent events brings about 6 and 19 percentage point changes Years since violence 0.00 0.04
in the likelihood of selecting the safest lotteries in the risk and ambiguity [0.02] [0.027]
domains, respectively (see Appendix Table A7 for the AME). These effects # of violent events * years 0.04* 0.05*
since violence [0.02] [0.027]
account for significant and sizeable increases of 16 and 59 percent in the
proportion of more risk-averse choices in these domains. Note that the
Sample Full Full Full Full
effect of violence on risk attitudes in this case is higher than for the full Hh controls Yes Yes Yes Yes
sample possibly because of the more recent experience of violence of Regional Fixed Effect Yes Yes Yes Yes
subjects victimized en masse.27 Observations 282 282 282 282
The results from this section contribute to the literature by illustrating Notes: Estimates from the ordered probit model 1, which ranks lottery choices from the
how the direct experience of violence influences victims' risk attitudes safest gamble (Lottery 1) to the riskiest (Lottery 6). A positive (negative) coefficient in-
and by revealing a considerable heterogeneity in their behavioral re- dicates that the variable of interest has a negative (positive) effect on the probability of
choosing the safest lottery. Columns 1 and 2 focus on the decisions during the gains task,
sponses. First, risk attitudes shift as a function of the severity of the ep-
while Columns 3 and 4 focus on the decisions during the ambiguity task. The table reports
isodes of direct victimization. Second, the behavioral effect is not the estimated coefficients for the severity of violence, measured by the standardized
permanent and instead it gradually vanishes with time. Third, the effects number of all violent events to which a household was exposed, the temporal proximity of
are stronger under the ambiguity domain, when the first order proba- violence, measured by the years since the peak of violence and displacement, and their
interaction. As described in equation (1), each model includes a set of current and ex-ante
bility distribution of payoffs was unknown.
covariates and a regional fixed effect. Current covariates include the subject's age and
gender, whether he or she is the household head, whether the household experienced an
4. Unpacking the mechanism: psychological trauma and risk economic shock or the death of a household member for reasons not related to violence,
aversion and the hypothetical earnings in the previous practice round. Ex-ante (pre-violence)
covariates include the household size, size of land holdings, participation of a household
member in local organizations, and participation of the household in agricultural work.
In this section, I analyze the psychological channel through which Estimated coefficients of the covariates and fixed effect are not reported for expositional
violence affects risk attitudes. For this purpose, I first establish the rela- purposes but are available upon request. Average marginal effects of the severity of
tion between violence and symptoms of different psychopathologies, and violence on the probability of selecting each lottery are reported in Appendix Table A4.
then I test whether anxiety disorders explain the shift in risk attitudes. Standard errors are reported in brackets, and were clustered at the level of the reception site
(n ¼ 4) through a bootstrapping procedure with 1000 replications. *p < 0.10. **p < 0.05.
Finally, I explore two falsification tests of the underlying psychologi-
***p < 0.01.
cal framework.

4.1. Violence and psychological trauma
To understand how psychological trauma responds to the severity and
temporal proximity of violence, I estimate model 2 in which I regress the
T-score for the symptoms of disorder j on the severity and recency of
violence and on their interaction. I focus on symptoms of anxiety, phobic
anxiety, and hostility, given their effects on risk attitudes in the lab. As
before, the model includes a regional fixed effect, and the error term is
clustered at the municipality level and estimated through a bootstrapping
procedure. In addition, I control for the gender of the respondent to ac-
count for the well-known differences in the susceptibility to psycholog-
ical trauma among men and women.
Tjih ¼ β1 Severityh þ β2 Recencyh þ β3 Severityh  Recencyh þ … β4 Male
þ νr þ εim
(2)
Table 5 reports the results of model 2 for the full sample and confirms
the predictions of the literature in psychology—namely, that more severe
and recent episodes of violence produce more severe symptoms of psy-
chological trauma, especially for the two anxiety disorders. For instance,
a one-standard-deviation increase in the number of violent events suf-
fered by the household increases the T-scores for the anxiety and phobic
anxiety disorders by 1.4 and 1.5 points, respectively. These effects ac-
count for 0.14 and 0.15 standard deviation increases in the symptoms of
these two anxiety disorders and are approximately three times higher
than the effects for the hostility disorder. Moreover, the coefficients for
the temporal proximity of violence and its interaction with the severity of
violence, indicate that the symptoms of both anxiety disorders become
less severe with time. In the case of phobic anxiety, symptoms fade out
over time independently of the severity of the victimization.28
4.2. Psychological trauma & risk aversion
Having established the effects of violence on different psychopa-
thologies, I now address whether psychological trauma is the mechanism
through which violence influences risk attitudes. For this purpose, I first
estimate model 3, in which I regress the lottery choice of individual i,
from household h, in the experimental domain d (yihd ) on PhobicAnxietyi
and Hostilityi , two indicator variables denoting whether subject i scored
above the critical threshold. I focus on phobic anxiety since it is more
closely related to the episodes of victimization than the general anxiety
disorder (see footnotes 14 and 15). Likewise, I focus on the hostility dis-
order since the laboratory studies cited above find that it brings about
lower levels of risk aversion, although few subjects score above the
corresponding threshold. Again, I include a set of individual household
characteristics (current and ex-ante) and a regional fixed effect, and I
estimate the error term, clustered at the municipality level, through
bootstrapping with 1000 repetitions.
0 t 0 t1
yihmd ¼ β1 PhobicAnxietyi þ β2 Hostilityi þ Γ1 X i þ Γ2 X h þ νr þ εim (3)

27
Panel A of Table 6 reports the results of model 3 above. Overall, the
For this subsample, I fail to reject the null hypothesis when I include the temporal
proximity of violence and its interaction with the severity of violence, although the sign of
results in the table indicate that higher symptoms of phobic anxiety bring
the coefficient still points towards an increase in risk aversion due to violence (see
Table A7). This is likely explained by the limited variation in timing of violence for this
28
subsample. Recall that most subjects in this subsample migrated within a year of the data For the sample of subjects who were victimized en masse, the effect of the severity of
collection (see Table 1), and that they were victimized at the same time as their neighbors, violence on psychological trauma is qualitatively robust but no longer statistically sig-
meaning that the timing of violence only varies across 9 villages. nificant (Appendix Table A8).

23
A. Moya Journal of Development Economics 131 (2018) 15–27

Table 5
Violence and psychological trauma.

Anxiety Phobic Anxiety Hostility

[1] [2] [3] [4] [5] [6]

# of violent events (standardized) 1.26** 1.36*** 1.38y 1.48* 0.25 0.54**

[0.544] [0.300] [0.883] [0.853] [0.396] [0.212]
Years since violence 0.52 0.58* 0.08
[0.384] [0.338] [0.128]
# of violent events * years since violence 0.19** 0.20 0.30
[0.077] [0.239] [0.296]

Sample Full Full Full Full Full Full

Regional Fixed Effects Yes Yes Yes Yes Yes Yes
R2 0.04 0.09 0.06 0.10 0.04 0.05
Observations 282 282 282 282 282 282

Notes: Each column reports the estimated coefficients of an ordinary least squares (OLS) regression of the T-score of different dimensions of psychological trauma (indicated at the top of the
column) on the severity and temporal proximity of violence and its interaction. Standard errors, which are reported in brackets, were clustered at the municipality of reception (n ¼ 4) and
estimated through bootstrapping using 1000 replications. yp < 0.12. *p < 0.10. **p < 0.05. ***p < 0.01.

Table 6 Table 6 also highlights that subjects who score above the critical
Psychological trauma and risk aversion. threshold for the hostility disorder are less risk averse. This effect is also
Ordered Probit Estimates Gains Ambiguity consistent with the findings of the previously cited studies in social
[1] [2] [3] [4] psychology, which find that emotions of anger lead to lower levels of risk
aversion. However, to the extent that violence has moderate effects on
A. Reduced Form: T-scores above the critical threshold
Phobic Anxiety 0.23** 0.33** 0.20** 0.34**
the incidence of hostility disorders and that a few subjects score above
[0.110] [0.153] [0.101] [0.169] the critical threshold for this psychopathology (see Fig. 1 and Table 5),
Hostility 0.38* 0.53* this result does not contradict the results from Table 4, which indicate
[0.219] [0.277] that by and large violence lead to higher levels of risk aversion.

Sample Full Full Full Full

4.3. Average controlled direct effect of violence
Hh controls Yes Yes Yes Yes
Regional fixed effect Yes Yes Yes Yes
Observations 282 282 282 282 The results from Tables 5 and 6 far indicate that the experience of
B. Mediation Analysis severe and recent violence induces higher levels of phobic anxiety dis-
Direct Controlled Effect of 0.164 0.174 0.183 0.164 orders, which bring about higher levels of risk aversion. While this
Violence [0.115] [0.117] [0.117] [0.115] analysis is a first step in the analysis of the underlying mechanism, it does
not demonstrate the mediating role of psychological trauma. For this
Sample Full Full Full Full
reason, I follow Acharya et al. (2016) who provide a method to estimate
Hh controls Yes Yes Yes Yes
Regional fixed effect Yes Yes Yes Yes
the unbiased average controlled direct effect (ACDE) of a treatment; this
Observations 282 282 282 282 is, the causal effect of a treatment (violence) when the effect of the
mediator (psychological trauma) is already taken into account. The
Notes: Panel A estimates model (3) and explores the effect of scoring above the critical
threshold for each disorder (Ti > 63) on the gains (Columns 1 and 2) and ambiguity do- approach of Acharya et al. (2016) is useful in this context for two reasons:
mains (Columns 3 and 4). Panel B reports the estimated coefficient of the ACDE of violence First, because it allows me to analyze whether anxiety disorders are one
on risk aversion after controlling for the extent of severe phobic anxiety disorders (Columns mechanism through which violence influences risk attitudes, and
1 and 3) or the extent of severe phobic anxiety and hostility disorders (Columns 2 and 4) in
whether there are other mechanisms that contribute to explaining this
the first stage. Covariates are the same as in Table 4. The estimated coefficients of the
covariates and fixed effect are not reported but are available upon request. Standard errors
relationship. Second, because it provides an alternative to the standard
are reported in brackets. For Panel A, they were estimated through a bootstrapping pro- method of testing for mechanisms, where one simultaneously controls for
cedure using 1000 replications and clustering at the level of the reception site (n ¼ 4). For the treatment and mediating variables, but that often leads to biased and
Panel B, errors were estimated following Acharya et al. (2016). *p < 0.10. **p < 0.05. inconsistent estimates.30
***p < 0.01.
The ACDE is estimated through the following two-stage regression: In
the first stage, one transforms the dependent variable by removing the
about higher levels of risk aversion over the gains and ambiguity do- effect of the mediator variable. In the second stage, one estimates the
mains. When I do not control for the extent of hostility disorders (Col- ACDE by regressing the demediated dependent variable on the treatment.
umns 1 and 3), the AME indicate that the probability of selecting the If the null hypothesis is rejected, one can conclude that the treatment
safest lotteries in the gains and ambiguity domains is 8 and 7 percentage influences the variable of interest through other pathways in addition to
points higher, respectively, for subjects experiencing severe symptoms of the proposed mechanism. By contrast, if one cannot reject the null hy-
phobic anxiety (see Appendix Table A9). When I control for both disor- pothesis, this means that treatment has no effect on the variable of in-
ders (Columns 2 and 4), I find a positive effect of 11 percentage points on terest, once the mechanism is accounted for. In other words, that the
the probability of selecting the safest lottery in each domain. These re- effect is exclusively driven by the proposed mechanism.
sults correspond to significant changes of 30 and 35 percent in the pro- I run the following two-stage model to estimate the ACDE of the
portion of safe choices relative to the mean.29 severity of violence and test whether its influence on risk attitudes runs
exclusively through psychological trauma:

29
These results are robust to different specifications, including when I control for the
symptoms of general anxiety, when control for the symptoms of the three psychopathol-
ogies at the same time, or when I focus on the continuous T-scores for both disorders (see
30
Table A11). In addition, results are qualitatively robust when I focus on the subjects who See Acharya et al. (2016) for a detailed discussion on the way in which simultaneously
were victimized en masse. Although the point estimates are not significant for this smaller controlling for the treatment and the proposed mechanism leads to either M-bias or
subsample, the signs if the coefficients are still consistent with the results above. posttreatment bias.

24
A. Moya
0 t
yihmd ¼ β1 Severityh þ β2 PhobicAnxietyi þ β3 Hostilityi þ … Γ1 X i
0 t1
þ Γ2 X h þ νr þ εim (4)
t1
~yihmd ¼ γ 1 Severityh þ Γ2 'X h þ νr þ μim
where y~ihmd ¼ yihmd  b β 2 PhobicAnxietyi þ b
β 3 Hostilityi is the demediated
measure of risk aversion, and μim; is the consistent error term estimated
through bootstrapping.31 As in the previous models PhobicAnxietyi and
Hostilityi are indicator variables denoting whether subject i scored above
t1 t Second, I address whether the severity and temporal proximity of
the critical threshold for each disorder, X h and X i are the matrices of ex-
ante and current (posttreatment) covariates, and νr is a regional
fixed effect.32
Panel B of Table 6 reports the estimated ACDE of the severity of
violence on risk attitudes over the gains and ambiguity domains. Col-
umns 1 and 3 report the results when I only consider the effect of the
severe symptoms of phobic anxiety in the first stage of model 4, while
Columns 2 and 4 report the results when I also control for the severe
symptoms of hostility. The results in the table indicate that the co-
efficients for the ACDE of violence are much smaller than those presented
in Table 4 and none of them is statistically significant. This means that
once we account for the effect of the symptoms of phobic anxiety, the
severity of violence does not have a significant effect on risk attitudes. In
other words, that the effect of violence on risk aversion is in fact
explained by the severity of anxiety disorders, as it was hypothesized at
the beginning of this article. To the extent that anxiety disorders follow a
dose-response relationship, this result is also consistent with the results
in Table 4.33
The analysis carried out in this section contributes to the literature in
different ways. First, it provides first-time evidence on the behavioral
consequences of violence for victims and highlights considerable het-
erogeneity based on the severity of symptoms of psychological trauma.
Second, it demonstrates the psychological mechanism that explains
violence influences risk aversion. This is something that had not been
analyzed yet by previous studies in the literature on the behavioral
consequences of violence.34
4.4. Falsification tests
Finally, I estimate two separate models that serve as falsification tests
31
As Acharya et al. (2016) discuss, the standard errors are biased in the second stage
estimation since they do not consider the first-stage estimation of b β 2 . Unbiased and
consistent standard errors can be obtained deriving a consistent estimator for the variance
of c
γ 1 for linear models or through bootstrapping. Here, I employ the latter method.
32
This method provides an unbiased estimate of the ADCE under two conditions:
Sequential Unconfoundedness and No Intermediate Interactions. The first condition en-
tails two related assumptions: First, that there is no omitted variable bias for the effect of
the treatment (violence) on the outcome (risk attitudes), conditional on pretreatment
confounders. Second, that there is no omitted variable bias for the effect of the mediator
(trauma) on the outcome, conditional on the treatment, and pretreatment and interme-
diate confounders. The first assumption was discussed thoroughly in section 3.2. The
second assumption would not hold if the susceptibility to experience psychological
trauma, conditional on a given level of violence, is related to the individual's underlying
risk attitudes or preferences in the absence of violence. The condition of No Intermediate
Interactions requires that the effect of the mediator on the outcomes is not a function of
intermediate confounders. When this assumption fails to hold, the estimated effect will be
a weighted average of the ACDE for different levels of the intermediate confounders. This
implies that the estimated effect would not be biased but could mask key heterogeneity.
33
Results are robust if I control for the temporal proximity of violence and its interaction
with the severity of violence in the first stage of model 4.
34
I also explore whether the results above are driven by more standard mechanisms; in
particular, by the economic consequences of violence and displacement. Under the stan-
dard assumption of decreasing absolute risk aversion, victims who become impoverished
should become more risk averse independently of their exposure to violence. For this
reason, I regress the choices during the experiment on the levels of per-capita consump-
tion, per-capita value of purchased goods, whether the household was a recipient of
governmental aid, or the size of the lands that was lost during the displacement. None of
these variables is significantly associated with risk attitudes (see Appendix Table A12).
25
Journal of Development Economics 131 (2018) 15–27
for the proposed psychological channel. First, I test whether the GSI has
the same effect as phobic anxiety disorders. Following the research in
social psychology, we should not observe any effects since the GSI pro-
vides an aggregate measure of psychological trauma and combines
different emotional responses, including anxiety and hostility, which
have distinct effects on risk aversion. Hence, if the GSI is correlated with
risk attitudes this would suggest that violence is a proxy for some of the
additional consequences brought about the displacement and victimi-
zation. Nevertheless, I find that neither of these measures have a statis-
tically significant effect on risk attitudes (Appendix Table A13).
violence and the incidence of severe anxiety disorders also influence risk
attitudes over the loss domain. This serves as a falsification test since the
studies in neuroeconomics cited before indicate that loss aversion is not
influenced by emotions. Therefore, if psychological trauma is indeed the
channel through which violence influences risk attitudes, we should not
observe any effects on the loss domain. Appendix Table A14 reports the
results when I replicate the analysis of Tables 4 and 6 above for the loss
domain. Results indicate that neither the severity of violence nor the
experience of severe phobic anxiety or hostility bring about significant
changes in the decisions over the loss domain (Column 1 and 3). How-
ever, subjects who had been victimized earlier become more loss averse,
especially if they were more severely victimized (Column 2). Taken
together, the results above suggest that while differences in the temporal
proximity to violence may influence loss aversion, they do independently
of the psychological consequences of violence.
4.5. Priming effects & external validity
An alternative explanation to the results is that they result from a
priming effect induced by the victimization questionnaire. This would
occur if subjects who were experiencing higher symptoms of psycho-
logical trauma were more affected when revisiting these experiences of
violence.35 Nevertheless, if this were the case, the priming effect would
precisely reflect the psychological consequences of violence and their
influence on individual behavior. Moreover, the research on the effects of
psychological trauma on behavior and emotional regulation suggests a
direct pathway between trauma and risk attitudes that is independent of
any priming mechanism (American Psychiatric Association, 2013; Kess-
ler et al., 1995; Mcewen and Sapolsky, 1995; Yehuda, 2002).
This discussion also speaks to the external validity of the results.
Unfortunately, I did not collect data on real-life economic decisions and I
cannot test whether my results illustrate how victims behave outside of
the laboratory. However, previous research has demonstrated that lab-
oratory experiments have the potential to inform about real economic
decisions, especially if they identify the principles governing behavior
(Camerer, 2015; Kessler and Vesterlund, 2015). The results on the
mediating role of psychological trauma, which are consistent with those
of studies in psychology on the physiological and emotional effects of
trauma, are a first step in this direction. Yet, more work is needed linking
data on psychological trauma, risk attitudes, and decisions outside of a
lab-in-the-field experiment.
5. Discussion
In this article, I analyze whether the experience of severe and recent
violence brings about changes in risk attitudes, and I also explore the
underlying psychological channel. For this purpose, I collected rich data
from victims of violence in Colombia, who have experienced different
levels of violence at different times and suffered above-normal levels of
35
More recent traumatic events may be recalled more vividly and prime subjects at a
greater extent. However, the null effect of the temporal proximity of violence on risk at-
titudes suggests that the effect on risk attitudes is explained by a priming effect among
those victimized more recently.
A. Moya
psychological trauma. This allows me to exploit the variations in the
severity and recency of violence and in the symptoms of psychological
trauma. Consistent with the findings of clinical and laboratory studies in
psychology, I find that the exposure to more severe violence induces
higher levels of risk aversion, that this effect is explained by the psy-
chological consequences of violence, and that it is not permanent and
instead fades out with time.
One of the limitations of the analysis is that the sampling strategy
focused exclusively on victims of violence and displacement, and does
not allow me to analyze the effects of violence at the extensive margin.
However, using a parallel sample of 318 subjects who reside in the same
conflict regions but who had not been victimized, I do not find that
victims are more risk averse than non-victims (see Table A15).36 While
this result may seem surprising, it is consistent with the conceptual
framework laid out since the introduction, which suggests that it is the
experience of severe and recent violence that induces higher levels of risk
aversion by triggering severe symptoms of psychological trauma.
The results raise three important implications. First, they speak to the
literature in behavioral economics that explores the influence of
noncognitive factors on behavior. Although canonical models of behavior
under uncertainty assume that risk preferences are a stable trait and that
decisions under risk and uncertainty are driven by cognitive assessments
(DellaVigna, 2009; Loewenstein, 2000), previous research demonstrates
that risk attitudes and decisions are often influenced by the individual's
emotional state (Ledoux, 1998; Loewenstein and Lerner, 2003). The
standard approach to studying the role of emotions on behavior has been
to administer random psychological primes that induce emotions in the
lab (Lerner and Keltner, 2001; Lerner and Tiedens, 2006; Lerner et al.,
2015; Raghunathan and Pham, 1999) and in the field (Callen et al.,
2014). To the best of my knowledge, this is the first study to test the
influence of psychological trauma on risk attitudes.
Second, the results indicate that the psychological and behavioral
consequences of violence can work as a different channel through which
violence thrusts victims into poverty. In a world characterized by
incomplete access to credit and insurance, higher levels of risk aversion
induce an inefficient resource allocation and hinder the investments that
are necessary to move out of poverty.
Although these implications are intuitive from the perspective of
development economics, the actual effects on poverty dynamics rest on
the magnitude and persistence of the shifts in behavior. In fact, one could
argue that the behavioral consequences of violence are not the primary
concern when designing policies aimed towards victims of violence. After
all, they also experience a massive loss of physical, human, and social
assets, which hinders their ability to recover and move out of poverty
(Ib
an~ ez and Moya, 2010a, 2010b). Nonetheless, victims of violence are
exposed to considerable sources of risk, and they lack access to formal
credit and insurance markets. Therefore, a shock that induces higher
levels of risk aversion, even if it is temporary, will discourage them from
making productive investments and induce inefficient decisions. These
range from distress asset sales and an unproductive use of transfers to
inadequate levels of investment in education, health, and income-
generating activities. Such decisions are costly in the short term and
can have irreversible consequences over time and across generations.
This article therefore provides additional justification for imple-
menting mental health programs to assist victims of violence. This does
not mean that such programs are necessary only because psychological
trauma can have negative economic consequences. The psychological
consequences of violence are, of course, important by themselves and
merit specific interventions and policies. Unfortunately, in countries torn
by violence, there is often a lack of awareness of the implications of
psychological trauma, and mental health programs are scarce and poorly
funded. This article makes a case for the importance of psychological
interventions for victims of violence by highlighting how psychological
36
This sample and result is described in more detail in Moya (2013).
26
Journal of Development Economics 131 (2018) 15–27
trauma can hinder the effectiveness of other, more traditional types of
interventions.
Finally, as the refugee crisis looms throughout the world, we need a
better understanding of the socioeconomic and psychological conse-
quences of violence. Previous studies on the behavioral consequences of
violence have in general focused on residents of conflict-torn regions,
but not necessarily on the victims of violence, displaced persons, or
refugees. Yet, it is also important that we understand the socioeco-
nomic, behavioral, and psychological consequences of violence for these
subsets of the population who were more severely affected by violence,
and who are more vulnerable to psychological trauma and poverty. Of
course, this raises many challenges, such as conducting fieldwork in
conflict regions, working with vulnerable populations, and asking sen-
sitive questions. Nonetheless, the findings and policy recommendations
that follow from our research should motivate us to embrace such
challenges.
Acknowledgements
I would like to thank Michael R. Carter for his advice and support
throughout this project and Diego Amador, Marc Bellemare, Steve
Boucher, Juan Camilo C
ardenas, Alessandra Cassar, Hillary Hoynes, Ana
~ ez, Rachid Laajaj, Travis Lybbert, Daniel Reese, Marc Rock-
María Ib
an
more, Laura Schechter, and two anonymous referees for useful com-
ments. I would also like to thank participants at seminars at the
University of San Francisco; University of California, Davis; University of
Wisconsin, Madison; Universidad de los Andes; the Midwest Interna-
tional Economic Development Conference; the Northeast Universities
Development Consortium Conference; the Pacific Conference for Devel-
opment Economics; and the Symposium for Economics Experiments in
Developing Countries for their comments. I am grateful to the public
officials and community leaders who assisted me during fieldwork and to
the victims who agreed to share their experiences of violence. The Pacific
Rim Research Dissertation Grant, Centro Latinoamericano para el
Desarrollo Rural (RIMISP), and the Henry A. Jastro Award provided
generous funding to collect the data, while the Harry Frank Guggenheim
Foundation provided a dissertation fellowship. IRB Approval for the
collection of human subjects data was awarded by the University of
California, Davis. The usual disclaimers apply.
Appendix A. Supplementary data
Supplementary data related to this article can be found at https://doi.
org/10.1016/j.jdeveco.2017.11.001.
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