Reparations as development: Evidence from the victims of the Colombian armed conflict

We study the impact of unconditional cash transfers on individuals and their communities. We exploit exogenous variation in the timing and magnitude of cash disbursements from a compensation program for victims of the internal conflict in Colombia, one of the largest of its kind. The program is generous (lump-sum transfers reach US $11,000 per person) and has benefitted more than 550,000 individuals (out of 6.5 million eligibles) since 2011. The timing of cash disbursement is unpredictable and unexpected for victims, which enables us to identify the effect these cash transfers have on the individuals that receive them (e.g., labor market outcomes, access to formal credit, land use). Moreover, spatial variation in treatment density across municipalities allows testing spillover and general equilibrium effects of these shocks in liquidity (e.g., effects on prices). Our work seeks to contribute to the literature evaluating cash transfer programs as tools to alleviate poverty and their potential spillover effects on the real economy.