This paper examines the effects of war on livelihood portfolios and welfare outcomes of rural households in Kosovo using the 2000 Kosovo Living Standards Measurement Survey. We question to what extent the legacy of war was experienced through selection into low return livelihood activities or through decreases in welfare generally. We first identify portfolios using a clustering algorithm which groups households pursuing similar combinations of activities.
The emerging clusters are comparable to those described in more qualitative studies for Kosovo in the immediate post-conflict period. We then examine the determinants of livelihood portfolio choice and the consequences of these for welfare outcomes, controlling for war legacies and selection into specific portfolios. We find evidence of a relationship between a household’s war experience and their livelihood choices and that war exposure has different impacts on household welfare depending on the livelihood portfolio adopted. We also identify significant selection effects on welfare for three out of four of our livelihood clusters, highlighting the fact that selecting into a specific portfolio raised or lowered welfare above expected levels.
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