Violent Conflict, Transport Costs, and Poverty: An instrumental variables approach with geospatial data for Nigeria

The nexus of conflict, transportation costs, and poverty is one which has received scant attention in the literature. This paper explores the effect of conflict on poverty in Nigeria, taking accessibility into account. The analysis relies on household data from the Living Standards Measurement Study (LSMS) and on conflict data from Armed Conflict Location Events Dataset (ACLED). To account for methodological challenges in the conflict data, we implement a ‘hot spot’ strategy whereby incidents within a limited geographic area over time are grouped. To address the potential endogeneity of conflict, we use past incidences of violence to instrument for more recent conflict. Transport costs are instrumented using the natural path, the time it takes to reach the market absent any roads. We find that decreasing transportation costs decreases multidimensional poverty and that its impact is stronger in areas of low conflict. We also find suggestive evidence that conflict and poverty are negatively correlated in Nigeria.