The increase in the international price of commodities after the international financial crisis in 2008 produced a gold rush in the Colombian economy, making legal and illegal mining a very profitable and attractive business. The increase in the illegal exploitation of metals like gold has exacerbated violence in municipalities with an abundance of such minerals. Gold is believed to be a new engine in the Colombian conflict. This paper documents the phenomenon and quantifies the causal impact that the gold boom has had on indicators of violence such as homicides, forced displacement and massacres. We use the location of national parks, indigenous reserves and geochemical anomalies associated with the presence of gold mines as instruments for illegal mining in order to disentangle the causal effect of illegal mining on violence. By law, it is very difficult to get licenses for the extraction of gold in parks and indigenous reserves, and this might be a factor increasing the prevalence of illegal mining activities in municipalities with these features. In order to have time variation in our instruments, we interact geographical features associated with the presence of gold and illegal gold mining (which vary only at the municipal level) with the international price of gold. Our estimates indicate that the rise of illegal gold mining has caused a statistically significant increase in violence, as measured with the homicide rate and the victims of massacres. However, we do not find a significant causal effect of illegal gold mining on forced displacement. Our interpretation is that the increase in the profitability of illegal mining activities has sparked a dispute over territorial control between illegal armed groups in order to monopolize the extraction of the precious minerals. Nevertheless, illegal mining is a labor intensive activity, and this may have counteracted the incentives of illegal armed groups to displace local populations from their land.
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