Rafael Ch et al. the wealthy and powerful in Colombia(Albertus and due to violence hurting the economy and by exten- Kaplan 2013;Flores 2014),and the FARC issued its sion,property value.The last of these is unlikely be- own tax rules.By obstructing the formal property rights cause it implies symmetric effects of violence by the regime,the FARC could meet its ideological commit- two parties on revenue,which we do not see.Turn- ments,impede the state in territory where it had influ- ing to (1)and(2),though we cannot directly measure ence,and avoid double taxing residents.Paramilitaries, intimidation and pressure,we can measure electoral on the other hand,were supported by groups such as outcomes.Municipalities with more paramilitary vio- large land owners who benefit from formal titles,in- lence do have a greater probability of electing can- cluding to secure land acquired through violence and didates from former President Uribe's right-wing po- coercion.The fact that formal titles create an obliga- litical party coalition,while the probability decreases tion to pay local property taxes would be a relatively in municipalities with high guerrilla violence.Causal small price to pay to secure new property. mediation analysis,however,shows that little of the In Colombia,we can make these expectations con- relationship between violence and tax revenue works crete and test them using disaggregated information on through electoral outcomes:the causal mediation ef- local institutions.We constructed a novel municipal- fect is small,statistically insignificant,and close to zero. level dataset that includes information on various di- This leads us to believe that more indirect mechanisms mensions of property and tax institutions,including the of capture,such as threats and violence against may- land value recorded in the cadaster(i.e.,property reg- ors and city council representatives,account for the dif- istry),the number of cadastral updates,and the dura- ferences in tax revenue and land formalization across tion between updates.s Municipal taxes are primarily municipalities. levied on property value,which is recorded and up- Overall then,guerrilla and paramilitaries'asymmet- dated in the cadaster.Cadaster updates are supposed ric influence on tax performance and land formality are to occur every five years,but municipal administrations consistent with armed group capture at the local level. are responsible for initiating and paying for the up- The higher the level of violence by an armed group,the 4号元 date,and a high proportion do not meet this legal obli- more tax institutions'outcomes shift in the direction of gation (Departamento Nacional de Planeacion 2016). that group's preferences. These data allow us to observe property and tax in This paper contributes to our understanding of con- stitutions at a high resolution.We combine these data temporary state-building during internal wars in four with administrative information on municipal prop- ways.First,our findings show that armed groups have erty tax revenues as well as with variables that ac- the ability to capture the state's local institutions to count for the longitudinal dynamics of conflict activity shape policy outcomes in their favor,which can block in Colombia the state from developing effective institutions.Though We find that armed groups'violent activity correlates Centeno (2003)argues that a minimal administrative with differences in property formalization and taxation state is a necessary condition to generate state-building that are consistent with the groups'political positions in Tilly's framework.we show that capture is an over- Municipalities with significant insurgent violence re looked concern even when this condition is met.Sec- port less land formalization and lower tax receipts.Mu- ond,we offer evidence that armed groups'preferences nicipalities that experienced significant paramilitary vi- and civilian "constituencies"are relevant for how they S5.501g olence have more land formalization and higher tax behave (Wood 2003:Gutierrez Sanin 2003).Third.the receipts.Revenue changes are mirrored by changes in variation in how armed groups reshape local tax insti- socio-economic outcomes,including development lev- tutions in their favor implies a need for a disaggregated els(measured with nighttime light intensity)as well as approach to post-conflict reconstruction.In Colombia secondary school enrollment,which are higher in ar- for example,the state should focus on land redistribu- eas with more paramilitary violence and lower in areas tion and progressive taxation measures in areas where with more guerrilla violence(see Appendix G in the the paramilitaries were dominant.In areas where in- Online Appendix). surgents were dominant,attention to land formaliza There are three obvious mechanisms that could drive tion and tax collection should be prioritized.Finally, the relationship between violence and revenue:(1)in- there is a broader policy lesson in these results.While direct capture through intimidation and pressure on fiscal decentralization might maximize political econ- political actors to update the cadaster or not,(2)di- omy goals in stable countries,it may also engender sig- rect capture of institutions through elections of favored nificant drawbacks in those experiencing ongoing vio- candidates who then carry out the policy preferred by lence(Steele and Schubiger,forthcoming;Eaton 2006) the armed group,and (3)reductions in tax revenues To restore the state's control over local tax institutions and property rights,the central state may have to limit 7 Early paramilitary supporters included drug traffickers who pur- municipal autonomy. chased vast tracts of land(Romero 2000:Ronderos 2014) The rest of the paper is organized as follows:The 8 The cadaster and the property title registry(Registro de Instrumen- next section provides some context and discusses the L tos Publicos)form the basis for property rights.The cadaster records theoretical framework of our argument.This is fol- the physical characteristics of land plots and properties,such as the lowed by the introduction of the data sources and our size and value.The Registro records the title holder for the property. As part of the peace agreement with the FARC,a new integrated empirical strategy.The subsequent section presents the cadaster and Registro is planned to eliminate red tape and modernize main results and robustness checks,followed by the the cadaster.See Departamento Nacional de Planeacion(2016). conclusion to the paper. 998Rafael Ch et al. the wealthy and powerful in Colombia (Albertus and Kaplan 2013; Flores 2014), and the FARC issued its own tax rules.By obstructing the formal property rights regime, the FARC could meet its ideological commit￾ments, impede the state in territory where it had influ￾ence, and avoid double taxing residents. Paramilitaries, on the other hand, were supported by groups such as large land owners who benefit from formal titles, in￾cluding to secure land acquired through violence and coercion.7 The fact that formal titles create an obliga￾tion to pay local property taxes would be a relatively small price to pay to secure new property. In Colombia, we can make these expectations con￾crete and test them using disaggregated information on local institutions. We constructed a novel municipal￾level dataset that includes information on various di￾mensions of property and tax institutions, including the land value recorded in the cadaster (i.e., property reg￾istry), the number of cadastral updates, and the dura￾tion between updates.8 Municipal taxes are primarily levied on property value, which is recorded and up￾dated in the cadaster. Cadaster updates are supposed to occur every five years, but municipal administrations are responsible for initiating and paying for the up￾date, and a high proportion do not meet this legal obli￾gation (Departamento Nacional de Planeación 2016). These data allow us to observe property and tax in￾stitutions at a high resolution. We combine these data with administrative information on municipal prop￾erty tax revenues as well as with variables that ac￾count for the longitudinal dynamics of conflict activity in Colombia. We find that armed groups’ violent activity correlates with differences in property formalization and taxation that are consistent with the groups’ political positions. Municipalities with significant insurgent violence re￾port less land formalization and lower tax receipts.Mu￾nicipalities that experienced significant paramilitary vi￾olence have more land formalization and higher tax receipts. Revenue changes are mirrored by changes in socio-economic outcomes, including development lev￾els (measured with nighttime light intensity) as well as secondary school enrollment, which are higher in ar￾eas with more paramilitary violence and lower in areas with more guerrilla violence (see Appendix G in the Online Appendix). There are three obvious mechanisms that could drive the relationship between violence and revenue: (1) in￾direct capture through intimidation and pressure on political actors to update the cadaster or not, (2) di￾rect capture of institutions through elections of favored candidates who then carry out the policy preferred by the armed group, and (3) reductions in tax revenues 7 Early paramilitary supporters included drug traffickers who pur￾chased vast tracts of land (Romero 2000; Ronderos 2014). 8 The cadaster and the property title registry (Registro de Instrumen￾tos Públicos) form the basis for property rights. The cadaster records the physical characteristics of land plots and properties, such as the size and value. The Registro records the title holder for the property. As part of the peace agreement with the FARC, a new integrated cadaster and Registro is planned to eliminate red tape and modernize the cadaster. See Departamento Nacional de Planeación (2016). due to violence hurting the economy and by exten￾sion, property value. The last of these is unlikely be￾cause it implies symmetric effects of violence by the two parties on revenue, which we do not see. Turn￾ing to (1) and (2), though we cannot directly measure intimidation and pressure, we can measure electoral outcomes. Municipalities with more paramilitary vio￾lence do have a greater probability of electing can￾didates from former President Uribe’s right-wing po￾litical party coalition, while the probability decreases in municipalities with high guerrilla violence. Causal mediation analysis, however, shows that little of the relationship between violence and tax revenue works through electoral outcomes: the causal mediation ef￾fect is small, statistically insignificant, and close to zero. This leads us to believe that more indirect mechanisms of capture, such as threats and violence against may￾ors and city council representatives, account for the dif￾ferences in tax revenue and land formalization across municipalities. Overall then, guerrilla and paramilitaries’ asymmet￾ric influence on tax performance and land formality are consistent with armed group capture at the local level. The higher the level of violence by an armed group, the more tax institutions’ outcomes shift in the direction of that group’s preferences. This paper contributes to our understanding of con￾temporary state-building during internal wars in four ways. First, our findings show that armed groups have the ability to capture the state’s local institutions to shape policy outcomes in their favor, which can block the state from developing effective institutions.Though Centeno (2003) argues that a minimal administrative state is a necessary condition to generate state-building in Tilly’s framework, we show that capture is an over￾looked concern even when this condition is met. Sec￾ond, we offer evidence that armed groups’ preferences and civilian “constituencies” are relevant for how they behave (Wood 2003; Gutiérrez Sanín 2003). Third, the variation in how armed groups reshape local tax insti￾tutions in their favor implies a need for a disaggregated approach to post-conflict reconstruction. In Colombia, for example, the state should focus on land redistribu￾tion and progressive taxation measures in areas where the paramilitaries were dominant. In areas where in￾surgents were dominant, attention to land formaliza￾tion and tax collection should be prioritized. Finally, there is a broader policy lesson in these results. While fiscal decentralization might maximize political econ￾omy goals in stable countries, it may also engender sig￾nificant drawbacks in those experiencing ongoing vio￾lence (Steele and Schubiger,forthcoming; Eaton 2006). To restore the state’s control over local tax institutions and property rights, the central state may have to limit municipal autonomy. The rest of the paper is organized as follows: The next section provides some context and discusses the theoretical framework of our argument. This is fol￾lowed by the introduction of the data sources and our empirical strategy. The subsequent section presents the main results and robustness checks, followed by the conclusion to the paper. 998 Downloaded from https://www.cambridge.org/core. Shanghai JiaoTong University, on 26 Oct 2018 at 03:53:05, subject to the Cambridge Core terms of use, available at https://www.cambridge.org/core/terms. https://doi.org/10.1017/S0003055418000333