Peaceful entry: Entrepreneurship dynamics during Colombia’s peace agreement

The end of internal conflict is often shaped by political uncertainty and threats of violence recurrence. This implies that the effects of conflict termination on economic activity and specifically entrepreneurship can go in either direction, and we know little about this relationship. Studying Colombia’s recent peace agreement with the FARC guerrilla, and using a difference-in-differences empirical strategy, we document that dynamics of entrepreneurship in traditionally violent areas closely mapped the politics that surrounded the peace agreement. When the agreement was imminent after a 5-decade conflict and violence had plummeted, local investors from all economic sectors established new firms and created jobs. Instead, when the agreement was rejected in a referendum, the party that promoted this rejection raised to power, and violence re-escalated, the rate of firms’ creation rapidly reversed. •Conflict termination does not imply positive and long-lasting economic gains.•We study firm creation in Colombia after the end of the conflict with the FARC.•New firms are differentially created in FARC areas after the start of a ceasefire.•There are new firms in various sectors, that also imply net employment gains.•Effect is short-lived and main mechanism is dynamics of violence and political uncertainty.