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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 from employee locations. Using these measures, our main analysis finds that
violent shocks reduce local firm presence by both increasing firm exit and decreasing
entry. Firms react most to violence in their ‘headquarters’ district. We further
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.
