We investigate post‐war economic activity choices of displaced and just‐returned individuals. In particular, the effect of living in an internally displaced persons camp on the choice of economic activities is analysed. Because individuals relocating away from camps may be different from those staying in them, a recursive bivariate probit procedure is used to control for selection on unobservables. The empirical procedure also relies on merging survey data with the micro‐level dataset on conflict events. This allows us to incorporate conflict in the framework, but also to use a bivariate probit procedure to control for endogeneity (selection of households out of camps). This work contributes to literature on household labour allocation and economics of conflict. Results show that residing in a camp has varied effects on the choice of economic activities. Individuals in camps may be more inclined than those who choose to return home, to engage in certain economic activities. One of the key lessons that could be drawn from this paper is that internally displaced persons may possess important livelihood skills that post‐conflict development interventions need to take advantage of, in order to fast‐track recovery.