# Introduction

The goal of this background paper is to provide a detailed analysis of the link between poverty and armed conflict using the newest available conflict and poverty data both at the country level and at the regional level. We will first review the literature on the complex relationship between poverty, conflict, crime and other co-determinants. We then develop a measure based on the literature on the role of conflict risk and human capital accumulation and use this measure to investigate the relationship between conflict and poverty.

Before we go on to discuss the role of armed conflict in poverty, it is important to understand the limitations of the present background study. We will approach the role of conflict in poverty through two commonly used data sets, the Uppsala Conflict Data Programme (UCDP) and the Armed Conflict Location & Event Data Project (ACLED), both of which track violent conflict around the world. The UCDP uses the most stringent definition of conflict by focusing on events that result in battle-related deaths. According to the definition used, battle-related deaths result from the use of armed force between warring parties in a conflict, be it state-based or non-state. This implies a focus on specific, organized, extreme levels of violence, i.e. it does not include riots for example. ACLED is more lenient in its definition of a conflict event, but also gives its coders specific guidelines targeted at capturing political violence.

We relate these conflict data to poverty through an analysis at the country and region level, i.e. we do not analyze the experience of households or neighborhoods in a city and we do not study crime. This produces an important omission as interpersonal violence, like homicides, constitutes the vast majority of violent deaths. Hoeffler and Fearon (2015) stress, for example, that for every civil war battlefield death, roughly nine people are killed in interpersonal disputes. The relevance of interpersonal violence and crime for economic activity is beyond doubt. However, as we will explain in the following section, these effects are not showing up in economic changes at the macro level but in ways which are best studied at the micro level, i.e. by collecting data on the directly affected individuals and firms. We will review this literature but, in our analysis, focus on the relationship between political violence and poverty.

This report is structured as follows. We will first give a detailed overview over the existing literature on the economic costs of violence and explain the focus on armed conflict. We then discuss the crosscountry evidence followed by regional evidence and a detailed case study of Uganda.

# Complex Relationship between Conflict and Poverty

## Violence and Poverty: An Overview

There is a clear pattern in the cross-country data - the poorest countries are also the countries which suffer most from armed conflict. This broad cross-sectional correlation could be driven by a lot of different factors including geography and colonial origins which affect both the tendency for conflict and poverty.

A first strategy to shed light on the causal link between conflict and poverty is to simply control for other factors at the macro level or to look at changes across time. The macroeconomic impact of civil wars has been studied extensively in this way for more than two decades and several studies have shown that countries which suffer from an armed conflict also suffer economic collapse. In one of the first studies, Collier (1999) analyzes armed conflict and GDP growth using cross-county data on internal wars which occurred between 1960 and 1992. He finds that civil conflict is correlated with a contemporaneous reduction of GDP per capita growth of 2.2 percent. On a regional level, Abadie and 1