The Effect of Ethnic Violence on an Export- Oriented Industry

Abstract

This paper investigates the e¤ects of ethnic violence on export-oriented …rms and their workers. Following the disputed 2007 Kenyan presidential election, export volumes of ‡ower …rms a¤ected by the ensuing violence dropped by 38 percent and worker absence exceeded 50 percent. Large …rms and …rms with stable contractual relationships in export markets registered smaller proportional losses and had fewer workers absent. Model calibrations indicate that, to induce workers to come and work overtime, operating costs, on average, increased by 16 percent. For the marginal worker, the cost of going to work exceeded the average weekly income by 320 percent.