This paper studies the consequences of the internal armed conflict on production decisions in rural Colombia. We exploit a source of exogenous variation in the armed conflict-related incidents, that came up after the rupture in 2002 of peace dialogues between the Colombian government and the FARC guerrilla. Using a rich cross-sectional data on land use, and a Difference-in-Differences approach, we find that a variation in armed conflict-related incidents modifies the production decisions of the exposed farmers. In particular, the affected farmers adjust their investment portfolios by reducing the agricultural activities of their farm (-12.41pp), while increasing the relative presence of more liquid assets as livestock activities (9.70 pp). This effect is explained by a decrease in permanent crops (-15.40 pp), transitory crops (-14.46 pp) and fallow and rest areas (-1.62 pp), as well as the increase in livestock area in weeds and stubbles (6.00 pp), which represents an investment with lower relative production costs and greater flexibility of supply and commercialization. These effects persist even two years after the chock, which becomes evidence supporting the permanent consequences of the conflict in the decline of agricultural production.
