Guns and Roses: Flower Exports and Electoral Violence in Kenya

This paper studies how firms react to electoral violence. Predictions derived from a model of firms reaction to violence are tested using Kenya flower exporters during the 2008 post-election violence. The violence reduced exports primarily through workers absence and had heterogenous effects: firms with direct contractual relationships in export markets and members of the business association had higher incentives and lower costs of reacting to the violence and suffered smaller production and workers losses. Model calibrations suggest that the average firm operated at a loss during the violence and absent workers suffered welfare losses at least three times larger than weekly earnings. The results show how the impact of violence on trade is mediated by different institutional arrangements associated with export.