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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