disproportionately on vulnerable parts of the population, such as the poorest, ethnic minorities, and women (Box 1), exacerbating poverty.

Immediate impacts include human costs such as deaths, wounds, displacement, and flight, as well as loss of private property and psychological damage. Moreover warfare, especially internal conflicts like civil wars and insurgencies, tends to generate high casualties and other costs among the civilian population. At the individual level, insecurity increases uncertainty and vulnerability, making it more difficult for individuals to plan and invest for the future and to smooth consumption. It also limits the availability of informal risk management mechanisms, when for instance access to family or kin is disrupted by conflict. By limiting movements of people, crime may also impede access to employment and educational opportunities (particularly in the case of females).<sup>6</sup> Finally, ongoing conflict or widespread crime weakens the constraints on criminal and opportunistic behavior.

These costs are compounded by a set of dynamic effects stemming from coping with risks once they have materialized. Disruption of public services like education and health due to conflict or insecurity results in lower levels of human capital (due to disruption of education) and higher rates of mortality and morbidity (aggravated by the direct adverse impact of conflict-related phenomena like displacement on health). Human capital can be weakened by the direct effects of crime on victims, and by the associated atmosphere of fear that may encourage many to leave (particularly better-off and skilled people). A need to smooth consumption in the midst of conflict or insecurity can lead to use of costly informal coping mechanisms—such as selling assets (e.g. livestock), reducing risk-taking behavior (e.g. by shifting production to subsistence crops to avoid uncertainty related to market access), shortening time horizons, or turning to illegal activities (e.g. growing illicit crops or engaging in smuggling).

Another set of dynamic effects results from mitigation strategies that may be implemented before risks materialize. Emigration and risk-adverse behaviors on the part of those staying in the country lead to less investment in health, education, and innovation, all weakening the country’s human and social capital. The poor and disadvantaged have fewer options to mitigate or cope with these risks: hence they tend to be more often and more greatly affected by these risks (Box 1). Informal provision of security by or on behalf of local communities, a practice which often arises when governments fail to provide security, carries a risk that such mechanisms get captured by political or criminal interests, and that the “summary justice” often provided itself can heighten personal insecurity.

As in the case of investment climate issues, there are tools to gain a better understanding of some of these effects. A number of poverty assessments, and the underlying household surveys, seek to measure the vulnerability of people, poor and disadvantaged people in particular, to a variety of risks. Although security-related risks are often less straightforward to define and discuss than, say, a climatic risk such as drought, this issue can be analyzed. For instance, the National Rural Vulnerability Assessment in Afghanistan asked households if they had suffered from violence over the previous twelve months (see also Dercon, 2005).

> 6 An example is the impediments faced by Tamil fishermen in Eastern Sri Lanka during the civil conflict.  Such fishermen were often restricted from entering Colombo to sell their catch.  Due to use of boats by the insurgency, fishermen have had restrictions placed on their ability to purchase boat engines above a certain horsepower, and at times fishing at night has been restricted.  These are only some examples of how conflict made it more difficult, costly, and less rewarding for Tamil fishermen to earn their livelihoods.

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