Economics of Civil Conflict: Evidence from the Punjab Insurgency

The article reviews the economic causes and consequences of the civil conflict in Punjab (1978-1993). Based on the rationalist strand of the literature, commitment problems and issue indivisibilities were proximate causes for the rise of the Punjab insurgency. During the insurgency, agricultural growth and incomes suffered and large numbers of cultivators became unemployed. While smaller cultivators may have been hindered by a decline in productivity, the richer farmers appear to have been affected more by the insurgency. They reduced their long-term investment but did not change their short-term investment decisions. There were larger negative developmental effects on labor spending and education. There was less spending on permanent labor and on longer-term contracts in agriculture. The insurgency not only affected agricultural growth and the economic lives of those engaged in agriculture but also had wide-ranging impacts on human capital accumulation. The conflict led to distortions within households on educational spending. Due to a prevailing gender bias, the conflict exacerbated the educational gap between girls and boys. ________________________________________________________________