Firm growth and the development gap: Evidence from Colombia and the US

a column by Marcela Eslava, John Haltiwanger and Alvaro Pinzón for VOX: CEPR’s Policy Portal

A key difference between more and less developed countries lies in the speed at which the average business grows over its life cycle.

This column compares manufacturing firms in Colombia and the US, and concludes that average life cycle growth differences across countries with diverging income levels are largely driven by the superstars and the worst performers. Relative to the US, Colombia presents an overwhelming prevalence of microestablishments, a deficit of superstar plants, and less strict market selection pressure for underperforming plants.

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Death and taxes: Political violence shapes local fiscal institutions and state building

a column by Rafael Ch, Jacob Shapiro, Abbey Steele and Juan F. Vargas for VOX: CEPR’s Policy Portal

It is widely accepted that war between states can lead to increased fiscal capacity. Yet, there is no similarly clear, historically consistent accounting of how civil wars have affected state capacity and tax revenues.

Using recent evidence from Colombia, this column shows that municipalities affected by internal conflict have tax institutions consistent with the preferences of the parties that have managed to inflict more violence in the past. Internal armed conflict can help interest groups capture municipal institutions for their own private benefit, impeding state-building.

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