Abstract
We evaluate the world’s largest reparation program for victims of conflict. As part of its transition into peace, Colombia plans to award financial reparations to eight million victims of its internal armed conflict. These one-off, lump-sum cash awards represent three times on average recipients’ annual household income and can be as large as US$ 10,000. To estimate the causal effects of these cash awards, we use an event study approach to leverage the staggered rollout of cash payouts and the unanticipated timing of cash receipt by awardees. We link rich administrative microdata on victims and reparation recipients to track educational outcomes, (formal) labor market outcomes, health outcomes, and consumption through the credit market. We find clear evidence that victims use cash reparations to fund productive investments. Cash awards are invested in human capital accumulation, causing large gains in college attendance. Cash payouts induce substitution across jobs and occupations out of formal and high-risk wage employment and towards self-employment. Further, these capital injections foster formal business entrepreneurship and boost firm survival. In addition, cash windfalls significantly improve health, with economically meaningful decreases in health care utilization. Lastly, reparations cause shortterm debt relief and an increase in durable assets (motor vehicles) and homeownership.
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