Title: The Impact of Violence on Risk Attitudes and Subjective Expectations, and the Creation of Chronic Poverty Among the Internally Displaced Population in Colombia
Name: Andrés Moya
Assistant Professor
Economics Department, Universidad de los Andes, Bogotá, Colombia
a.moya@uniandes.edu.co
andresmoya.weebly.com
Year: 2011
Type: Dissertation Fellowship
Summary:

Shocks and traumatic experiences can alter the way in which individuals behave and deplete their ability to make economic decisions. My research analyzes how the direct experience of violence induces shifts in key dimensions of economic decision-making process, such as risk attitudes, hope, and expectations, and discusses the implications for poverty dynamics.

For this purpose, I bring together micro-level data from a living standards survey, a questionnaire on household victimization, and a psychological stress scale, with data from economic experiments designed to measure risk attitudes, hope, and expectations of future household mobility. I collected this data between November 2010 and June 2011 from a sample of rural households in Colombia, half of them who were exposed to different levels of violence, and forced to migrate within the past ten years.

Results indicate that being a victim of forced displacement induces higher levels of risk aversion, pessimistic expectations of social mobility, and a sense of hopelessness. Moreover, the shift in behavior is more pronounced for those individuals exposed to more severe and recent episodes of violence, and is driven at the psychological level by the incidence of severe phobic anxiety and depression disorders. The persistence of the impact of violence on risk attitudes therefore goes hand by hand with that of psychological trauma.

These results suggest that the psychological consequences of violence can thwart the economic recovery of victims and make them more vulnerable to future poverty; higher levels of risk aversion, a sense of hopelessness, and pessimistic expectations can all discourage individuals from making the necessary investments that are required to move out of poverty, and thus be tantamount to a behavioral poverty trap. I therefore provide evidence of a behavioral channel through which victims of civil conflicts can fall and remain trapped into poverty, a channel that had not been taken into account so far.

Considering that the legal and policy framework pays little or no attention to the psychological consequences of violence, these results also highlight the need to design and implement psychological assistance programs in order to successfully promote the socio- economic recovery of over 6 million victims of violence in Colombia.

Bibliography:

Moya, A. (Forthcoming  2014)  ¿Pueden la violencia y los trastornos mentales condenar a la población desplazada a una situación de pobreza crónica? in Costos Económicas y Sociales del Conflicto Armado en Colombia: ¿Cómo Construir un PostConflicto Sostenible? Camacho, A., Ibañez, A.M., and Mejía, D. (eds). DFID/ERSC and Universidad de los Andes.