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The Fiscal Cost of Conflict: Evidence from La Violencia in Colombia

Diana Ricciulli ()

No 18537, Documentos CEDE from Universidad de los Andes, Facultad de Economía, CEDE

Abstract: This paper studies the effect of internal conflict on local fiscal capacity using evidence from Colombia’s political conflict in the mid-20th century, better known as La Violencia. Following a difference-in-differences strategy, I find that internal conflict has negative long-term consequences in local fiscal capacity. More precisely, municipalities affected by La Violencia experienced an average reduction of 10.3% in their tax revenue and a fall of 2.8 percentage points on their ratio of taxes to total revenue. Effects lasted for more than a decade and are only partially explained by a population and economic activity downturn. These results are consistent with previous evidence indicating a negative effect of violence on tax collection effciency at the local level.

Keywords: Fiscal capacity; Internal conflict; La Violencia; Colombia (search for similar items in EconPapers)
JEL-codes: D74 H20 N26 (search for similar items in EconPapers)
Pages: 35
Date: 2020-12-02
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Handle: RePEc:col:000089:018537