The Hidden Cost of Violent Conflict: Sorting into Local Labor Markets in Colombia

 Kerstin Grosch, Marcela Ibanez, Gerhard Riener

Violent conflicts have negative effects on prosperity and development. Reconstruction efforts require that a qualified labor force is willing to work in highly violent areas. We use a field experiment to investigate the effects of life risk on sorting in the labor market. We offer comparable jobs in low and high conflict areas in Colombia to a pool of job seekers. Application rates decrease by 12 percentage points due to riskiness. This drop is similar for male and female job seekers, suggesting that if women are more risk-averse than men, the difference is not large enough to have an economic impact. A salary increase helps increase application rates to high-risk jobs but does not close the gap.