A Hidden Cost of Violent Conflict? Sorting into Local Labor Markets in Colombia

with Marcela Ibanez and Gerhard Riener

This paper examines whether violent conflict deters qualified workers, affecting reconstruction efforts. We develop a compensating wage differentials model, demonstrating that jobs with higher risks of violence are associated with negative selection. We test this prediction using a field experiment in which we offer comparable jobs in low- and high-conflict areas in Colombia to a pool of qualified job seekers. The results show that application rates decrease by 12~percentage points due to the risk of violence.  A 20~percent increase in the wage offer helps increase the application rates for high-risk jobs but does not eliminate the gap. We found no evidence of negative selection for qualified applicants or women.  Exposure to violence in early childhood significantly increases the likelihood of applying for a risky job, suggesting a habituation effect of conflict. These results have critical implications for post-conflict labor markets and the design of peacebuilding policies.