GCRF - Conflict and Private Economic activity: an analysis of new harmonised household data from sub-Saharan Africa (COPE)

Lead Research Organisation: University of Sussex
Department Name: University of Sussex Business School

Abstract

Some scant evidence exists that conflict influences households' investment choices in economic activities, for example by reducing investments in relatively more capital intensive activities and in activities with longer term returns. However it is unclear to what extent such results can be generalized across conflicts and what other factors may affect the direction and intensity of these effects. Beyond the type of investment, it is also not clear how changes in conflict intensity affect the growth of investment and firm size.
This research aims to provide comparative evidence by improving our understanding of the impact of violent conflict on investment in entrepreneurial activities with different growth potentials. Methodology will consist in building a new dataset matching and harmonizing household surveys and violent conflict events for fragile and conflict states (FCS) in Sub-Saharan Africa (SSA). We will investigate how conflict affects the type of private investments by households - type of activity, firm size, and returns to investment - and how institutional, geographical, and individual characteristics influence this entrepreneurial choice. We will also investigate how changes in conflict intensity affect firm growth in size, investment, and profits. This project will make a number of crucial academic and policy contributions. Firstly, it will shift the focus from the effect of conflict on the number of entrepreneurial activities to the composition of entrepreneurial activities with different growth potentials. Secondly, it will improve on the identification of the average effect of conflict on entrepreneurial activity and private sector development at the micro level. Thirdly, it will improve substantially our understanding of the institutional, geographical and conflict related factors that mediate the impact of conflict on entrepreneurial activity. Furthermore, the inclusion of a large set of countries will allow to test for the external validity of these effects across several countries and types of conflict on which no such evidence exists. All these achievement will be obtained through an approach that will credibly identify the causality of conflict on economic activity through the use of a novel instrumental variable strategy and exploiting a new household panel dataset. Lastly, and more importantly, we will be able to test the effect of conflict as a barrier to firm growth in size and investment.
This research adds to a debate on pressing social and policy issues: conflict and economic growth. It is therefore particularly relevant not only for the academic community, but also for policy makers, peace builders and peace keepers, NGOs operating in the field, employers, public, social and private enterprises, trade unions, training institutions and young and old members of the workforce that seek and use information on employment and investment decisions. Our dissemination plan ensures that the findings of our research reach all the above stakeholders to inform their decision-making processes.

Planned Impact

WIDER BENEFICIARIES
The findings are of direct relevance for African, international and national government bodies that aim at fostering entrepreneurship, development and increasing conflict resilience (including Departments of Industry, Trade and Investment; Labour and Employment; Finance; Commissions on Corporate affairs; World Bank; African Development Bank; Development and Sahel and West Africa Club Department at OECD; and regional groups (e.g. Southern African Development Coordination Conference), employers, i.a. Entrepreneurs Unions, civil society pressure groups on conflict and peacekeeping, the third sector, including major funders with a focus on poverty and inequality and donor organisations e.g. Oxfam.
The results from the project will support all these stakeholders to articulate responses to the effects of conflict in the private sector induced by the highest risk attached to investments in private productive activities. The research will inform evidence-based policy to fine-tune incentives for firms and entrepreneurs to invest more capital, fuelling economic growth, while at the same time increasing inclusion, improving employment, and reducing income inequality.

ENGAGING WITH USERS THROUGH DISSEMINATION, COLLABORATION AND CAPACITY BUILDING
The project team itself having long been engaged with organizations that have contacts with members of committees in government, international bodies and NGO experts, represents an excellent platform of joint academic excellence (SPRU and the School of Global Studies at the University of Sussex) and policy impact (World Bank, IPCR, PeaceDirect) to ensure the widest benefit in terms of academic and non-academic impact. This will be done through three engagement and three dissemination events across SSA, policy reports and research briefs, and an advisory commission on policy action with stakeholders included in the project activities (IPCR, World Bank, PeaceDirect).
The collaboration with PeaceDirect will be essential as the organization will commit to disseminate results from the research across different countries, translating the policy messages in other languages. Also SPRU, the School of Global studies, IPCR, and PeaceDirect teams have long-standing experience in academic and non-academic dissemination.

RELEVANCE
The topic addressed by this research is of utmost relevance and has entered the frontline of both UK and international debate following the recent publication of the UNCTAD Report (2015), which suggests that entrepreneurship plays a crucial role in creating conditions that will bring stability to communities and foster peace. The project will produce high quality academic research through the usage of different datasets, and it will focus specifically on the decision about the type of entrepreneurship conducted, the level of employee hired and the amount of capital invested.
The findings will allow engaged stakeholders to increase awareness about the relevant aspects of the current impact of insecurity on private activity, intervene in defence of the weakest groups in society, and lobby by informing about the best-practices for targeting the main effects of conflict on entrepreneurship.
For similar reasons the findings will highly benefit the actions of entrepreneur unions, as well as peacekeeping and peacebuilding organizations, particularly with reference to dimensions of post-conflict poverty and directly connected with employment, earnings, education and skills.
While the stakeholders mentioned above will benefit from the research directly, our purpose is to have a wider impact on the society. We hope that a clearer understanding of the different competing mechanisms will inform policies to lower firm failures in the mid to long term. We hope to stimulate further research and data analysis and collection, which will further inform decision making beyond the continental level.
 
Description The objectives of the project are:
1) to investigate the causal effect of violent conflict on dynamics and composition of private economic activities across countries/conflict/institutions/geographies;
2) in order to address (1), to build a new dataset combining and harmonising household surveys and violent conflict events for fragile and conflict states (FCS) across sub-Saharan Africa (SSA) countries;
3) to work with non-academic partners to maximise engagement and policy impact;
4) to produce high quality academic outputs;
5) to ensure training and capacity development of Early Career Researchers (ECRs).

2) has taken much longer than expected due to difficulties in accessing data, particularly on the geolocation of households, but is on its way.
We have now produced a database that harmonise information on the following household features that correlated with private economic activity and conflict: employment and entrepreneurship; credit and other money transfers; demography; education; household assets, including housing; land and livestock; migration; community and social capital.
The data base covers the following country/years that are used in the analysis in (1): Angola (1999); Burundi (1998); Cameroon (2001, 2007, 2010); Ethiopia (199, 2004, 2001, 2013, 2015); Kenya (1997, 2005); Madagascar (2001, 2009); Mali (2008, 2014); Mozambique (2008); Niger (2007, 2013); Nigeria (2010, 2013, 2015); Rwanda (2000, 2010); South Sudan (2008); Uganda (1999, 2002, 2005). Data for counties were collected, but not harmonised so far due to difficulties in accessing data about households location. These are Chad (2003); Congo, Democratic Republic (2005); Cote D'Ivoire (2002); Guinea (2002, 2007, 2012); Liberia (2007, 2010).
As reported in the current data manual, which is in the form of a report, the data alone provides an extremely rich description of households across very different countries, during years in which they have suffered conflict activities. Abstracting from the many details in the paper, this picture clearly shows how it is imperative to compare the microeconomic impact of conflict across different settings: despite these countries share the feature of being in conflict, households are affected in crucially different ways.

1) So far we have completed the analysis on the impact of conflict on the dynamics of small (informal) Nigerian firms (2010-15). We find that, despite small informal enterprises mangers do not consider conflict as a major obstacle to running a firm:
(i) An increase in conflict intensity reduces the probability that households hold a NFE, but increases the probability that they are self-employed;
(ii) As a consequence of conflict, NFE reduce their capital and input stocks, but they hire the same number of workers, and they increase the number of months in operation. As a result, their performance reduces: sales, productivity and profits drop;
(iii) The partial disinvestment is related to a reduction in the cost of inputs, including labour: i.e. firms work more, they hire the same amount of workers, but pay them less;
(iv) Part of the negative impact of of conflict on firms performance and behaviour is due to its effect on increasing costs (especially access to credit and land) and reduction in local demand (firms that rely less on final demand fare better)

3) We have spent the past 9 months to devise an engagement and disseminate strategy together with the Nigerian Institute for Peace and Conflict Resolution (IPCR) and the international NGO Peace Direct. Due to a number of unforeseen circumstances the engagement in Nigeria has been postponed twice. In the last week of March we will discuss the results under (1) above in conflict areas, such as the North (Kano), the south (Calabar), and the centre afflicted by confrontation between herders and settlers (Makurdi).
So far we have prepared framing document and storylines to be distorted to various stakeholders at these workshops.

4) Still ongoing, due to delays in preparing the harmonised database under (2)

5) Despite the small size o fate award, a large number of ECRs and research assistant were involved int he project at different stages, have contributed to it, and were supervised on different activities.
Giuseppe Maggio (University of Sussex and FAO), ECR co-I, has been working on the project since the beginning on data harmonisation, data collection, geolocation, analysis, and writing papers
Abiodun Egbetokun (NACETEM, Nigeria), ECR partner, has been working on the project since the beginning on data harmonisation, geolocation, and writing papers
Adekemi Oluwadare (NACETEM, Nigeria), ECR officer, has works on data harmonisation and geolocation, and writing the data paper
Maruf Sanni (NACETEM, Nigeria), ECR, has works on data harmonisation and geolocation, and writing the data paper
A large number of research assistants (Master students) in Nigeria (NACETEM) have contributed to data harmonisation, especially on geocoding
Annalena Oppel (IDS, Sussex), PhD student, has worked as research assistant on data harmonisation for a few months, before starting fieldwork in Namibia
Exploitation Route First, the objective (2) above will produce a unique and highly valuable database that can be used by a large number of researchers and policy makers to study the impact of conflict on several households outcomes. We estimate this to become a valuable resource with multiple ways in which it can be taken forward.
Second, results on the impact of households choice to invest in a private economic activity, and on the behaviour and performance of small firms will provide crucial results on micro channels though which conflict influences households welfare. These channels will be crucial to design policies to improve resilience and sustainability.
Third, starting from the result of our research, it will be possible to start investigating how private economic activity may contribute to reducing conflict.
Overall, as we know, a large proportion of the poor and migrants leave in conflict or fragile countries. At the same time, private economic activity is a crucial source of livelihood and economic development. Our results will open a large number of questions about how conflict, private economic activity, household welfare, and pace-building may be related.
Sectors Communities and Social Services/Policy,Education,Government, Democracy and Justice,Security and Diplomacy

 
Description The analysis is still ongoing and so far we have only produced preliminary academic results that have been discussed mainly in academic venues. Due to conflict related obstacles, we had to postpone engagement events planned in Nigeria. These will now happen on 25-29 March across the country. This events will be the first activity on our impact pathway design. The only other non academic event to report is the meeting at UNDP, New York, in April 2018 to discuss the report on "Pathways for peace" were results were presented and discussed by academics and UNDP officers.
First Year Of Impact 2018
 
Description New and Emerging Forms of Violence Data for Crisis Response: A Comparative Analysis in Kenya
Amount £199,015 (GBP)
Funding ID ES/P010709/1 
Organisation Economic and Social Research Council 
Sector Public
Country United Kingdom
Start 02/2017 
End 06/2018
 
Title Sub-Saharan African in-Conflict Countries: A Database 
Description We harmonised household (HH) data for 29 surveys across 15 Sub-Saharan countries. We first systematically compared the relevant questionnaire's sections and the related data. Second, following a "minimum common denominator (MCD)" principle, for each section we retained the most common variables, and for each variable we selected the common information (for instance in terms of response options) (see for other examples Kowal et al., 2000, Carletto et al., 2013). We focussed on a key number of sections such as individual/household-level labour activity, and other types of demographic, educational, and socio-economic information. The work has involved data mining and management, as well as the creation of a word log illustrating all the procedure applied for each variable. For all individual level variables, we have used the individual information, and then collapsed to household level by minimum, maximum, median, or mean, as needed. For the selection of surveys/years, we have followed three steps. First, we have identified all the surveys available in Sub-Saharan African countries containing information on household's private economic activity (PEA) and entrepreneurship. In a second step, we have identified conflict-years using ACLED data. Conflict-years have been defined as periods where the country experienced a higher level of conflict activity compared to its historical distribution. In doing so, we have also considered a minimum threshold of conflict events, to avoid the inclusions of countries that experienced a small number of conflict events, but were not experiencing a systematic conflict. In a final step, we have selected exclusively the surveys conducted during these conflict-years. Next, we geocoded households in order to be able to measure co-location with conflict activities. This is based on first accessing information on the household village through statistical offices (facilitated by World Bank partners) and then geocoding the villages. Due to several difficulties with finding reliable gazetteers this process is still ongoing. We are in the process of cross checking using different automatic retrieval and manual methods. 
Type Of Material Database/Collection of data 
Year Produced 2018 
Provided To Others? No  
Impact We are still geocoding villages, to make it useful to study the impact of conflict on households. We are still checking the data for any inconsistency, We will and seek authorisations to be able to publish online as a last step 
 
Description GCRF Global Engagement Meeting 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact The event was designed to contain a mixture of plenary sessions, workshops and networking opportunities with more than 100 attendees from different countries, different disciplines, and from a mix of academic and non-academic organisations (e.g. non-governmental organisations; charities; policy makers; international funders). We presented the the work done within COPE, its motivations and implications. I have no idea about the actual impact, but the presentation raised a lot interest and further engagement with many participants in the following days.
Year(s) Of Engagement Activity 2018
 
Description GCRF/UNDP Workshop 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Third sector organisations
Results and Impact The presentation was part of an initial engagement between GCRF and UNDP, in particular in relation to the then published Pathways for Peace Report.
The event helped discussing a new research agenda between GCRF and UNDP
Year(s) Of Engagement Activity 2018
 
Description Sussex GCRF event 
Form Of Engagement Activity Participation in an open day or visit at my research institution
Part Of Official Scheme? No
Geographic Reach Local
Primary Audience Postgraduate students
Results and Impact Researchers and postgraduate students attended to learn about GCRF funding and topics
Year(s) Of Engagement Activity 2019