We provide empirical evidence on how insecurity affects firm behavior by linking data on deadly terrorist attacks in Afghanistan to geolocated data on corporate mobile phone activity. We first develop an approach to estimate the geographic footprint of firms based on employee locations. Using these measures, our main analysis shows that violent shocks reduce local firm presence by both increasing firm exit and decreasing entry. Firms respond most strongly to violence in their “headquarters” districts. We also find suggestive evidence of persistence; stronger impacts in more secure districts; and spillovers, whereby attacks in provincial capitals reduce firm presence in surrounding rural districts. (JEL D22, K42, L11, L96, O18, R32)
Herskowitz et al. (Thu,) studied this question.