Endogenous Taxation in Ongoing Internal Conflict: The Case of Colombia

Abstract

Recent empirical evidence suggests an ambiguous relationship between internal conflicts, state capacity, and tax performance. In theory, internal conflict should create strong incentives for governments to develop the fiscal capacity necessary to defeat rivals. We argue that one reason that this does not occur is because internal conflict enables groups with de facto power to capture local fiscal and property rights institutions. We test this mechanism in Colombia using data on tax performance and property rights institutions at the municipal level. Municipalities affected by internal conflict have tax institutions consistent with the preferences of the parties dominating local violence. Those suffering more right-wing violence feature more land formalization and higher property tax revenues. Municipalities with substantial left-wing guerrilla violence collect less tax revenue and witness less land formalization. Our findings provide systematic evidence that internal armed conflict helps interest groups capture municipal institutions for their own private benefit, impeding state-building.

The Rise and Persistence of Illegal Crops: Evidence from a Naive Policy Announcement

“…We thus follow a growing empirical literature on the Colombian conflict (see e.g. Acemoglu et al, 2013 andCh et al, 2018), and use past violence over a period of years as an (imperfect) indicator of influence, as in Prem et al (2019a).…”

Killing Social Leaders for Territorial Control: The Unintended Consequences of Peace

“…We thus follow a growing empirical literature on the Colombian conflict (see e.g. Ch et al, 2018;Acemoglu et al, 2013;Fergusson et al, 2017Fergusson et al, , 2018, and use past violence over a period of years as an (imperfect) indicator of influence. 25 To measure the intention of other armed groups to dispute the control of a specific area, we follow Acemoglu et al (2015) to create a measure of exposure to other armed groups (neo-paramilitary criminal bands and the ELN guerrilla).…”

Democracy and civil war: The case of Colombia

“…Insurgents and paramilitaries both influenced public policy outcomes through municipal councils and mayors, although in different ways (Ch et al, 2018). For example, while insurgent presence has been associated with a decrease in land formalization (implemented by municipal governments), paramilitary presence has been linked to an increase in land formalization, and more tax revenue, as a result.…”