Endogenous Taxation in Ongoing Internal Conflict ideology,insurgents tried to mobilize and work with Though we expect tax revenue to be higher in areas peasants and workers who were traditionally shut out with paramilitary presence and lower in areas with of the political system.The distinct "constituencies" insurgent presence,we do not argue that right-wing of insurgents and paramilitaries imply differing prefer- paramilitaries or the elites that supported them fa- ences over policies. vored increased taxation or that the left-wing insur- A particularly fraught policy area that armed groups gents opposed redistribution.Instead,armed groups' intervened in is land formalization,which has implica- preferences over tax rates and enforcement are am- tions for local tax performance.Right-wing paramili- biguous in Colombia.Paramilitaries might try to ben- taries were founded by large landowners and narco- efit supporters by pushing for lower rates and lax en- traffickers who began to purchase tracts of land. forcement of property taxes.This position would be As they expanded,they displaced peasants and claimed consistent with historical precedent in the twentieth their land (Romero 2000;Ronderos 2014;Reyes century:Sanchez-Talanquer(2018)finds that following Posada 2009).To legitimate this transfer of land, large-scale land reform attempts,local elites registered paramilitaries sought to formalize property through property in the cadaster to establish their property the state.This was consistent with what we noted rights,but manipulated property value to avoid paying above:traditionally,elites have been able to secure le- higher tax.At the same time,paramilitaries could ben- gal title to their property,while poor peasants face mul- efit from an increase in local tax revenue because they tiple barriers to doing so.Updating cadasters to reflect issued lucrative contracts to supporters to carry out newly acquired or changed properties(for instance,an municipal functions like health services(Eaton 2006; enlarged plot of land)is consistent with an interest in Verdad Abierta n.d.).16 New landowners could also securing property rights,even if the property is illegally calculate that paying taxes was a small cost to pay acquired (for instance through claiming the land of a for securing property,and employ tax resources to displaced household).14 expand their control over the local bureaucracy and Left-wing insurgents favored more equitable land bargaining power relative to higher levels of govern- 4号元 distribution but not private property rights (Bernal ment (Sanchez-Talanquer 2018;Pardelli 2018).More- Morales 2014).One way they promoted this goal was over,short-term development of specific local admin- through land invasions,where poor peasants and work- istrative capacities does not prevent the long-term hol- ers would occupy state lands(baldios)or private prop- lowing out and capture of the state (Stasavage 2014). erty.However,such invasions were typically not for- Insurgents,though they did favor redistribution,pre- malized legally.More common in insurgent areas was ferred not to work through the state's institutions be- a preference for excluding or prohibiting represen- cause doing so would legitimate the state.The FARC tatives of the state from surveying the land or plot- issued its own tax code,targeting the wealthy in areas of ropertyncessary steps the ftormalization their influence(see below).In terms of property rights, the insurgents preferred to impede the efforts of the Given the divergent preferences of and incentives state (Bernal Morales 2014)and regulate land on its for armed groups to shape local property institutions own.17 we expect differences in local property tax perfor- Before we explain how we test our hypotheses,we mance overall.We propose four hypotheses: first summarize temporal trends in capture over the 5181.10198 course of the war In areas with substantial FARC and ELN violence: Civil War Dynamics and Capture in Colombia Hia Tax revenues per capita will be lower because fewer properties will be formalized. The dynamics of the civil war in terms of territorial Hib Left-wing parties will tend to outperform in mayoral control and violence have changed significantly over and municipal council elections controlling for the pre- time.We separate the war's recent evolution and the existing partisan balance. armed groups'capture strategies into four periods and organize the statistical analysis around these four pe- In areas with substantial paramilitary violence: riods because pooling them would effectively assume that armed actors had the same ability to influence tax H2a Tax revenues per capita will be higher because more policies in every year,which strikes us as substantively property will be formalized. unrealistic.The four periods(described in detail in Ap- eys H2b Right-wing parties will tend to outperform in mayoral pendix H)can be defined as follows: and municipal council elections controlling for the pre- existing partisan balance. 6 Though ideally we could test the effects of armed groups'influence on tax rates and enforcement,we do not have the data to do so.In 14 Ibaniez and Munoz(2011)find that the concentration of land be- the end,what we do test is the net effect of their influence on local tween 2000 and 2009 increases as the result of an increase in plots property tax revenue.These data indicate that whatever is happening mber of plots purchsed by few people. with tax rates and enforcement,land formalization measures increase Corporacion Regional para el Desarrollo Sostenible del Area de tax revenue overall. Manejo Especial la Macarena(CORMACARENA)official inter- One example of the FARC's intransigence on state-backed prop- view with the authors,Vista Hermosa,January 26,2011.This official erty rights was its opposition to land restitution for the internally told us he could not conduct land surveys in the area because the displaced through the Victims Law of 2011,calling it "legal dispos- FARC would not permit it. session"(Bernal Morales 2014). 1001Endogenous Taxation in Ongoing Internal Conflict ideology, insurgents tried to mobilize and work with peasants and workers who were traditionally shut out of the political system. The distinct “constituencies” of insurgents and paramilitaries imply differing prefer￾ences over policies. A particularly fraught policy area that armed groups intervened in is land formalization, which has implica￾tions for local tax performance. Right-wing paramili￾taries were founded by large landowners and narco￾traffickers who began to purchase tracts of land. As they expanded, they displaced peasants and claimed their land (Romero 2000; Ronderos 2014; Reyes Posada 2009). To legitimate this transfer of land, paramilitaries sought to formalize property through the state. This was consistent with what we noted above: traditionally, elites have been able to secure le￾gal title to their property, while poor peasants face mul￾tiple barriers to doing so. Updating cadasters to reflect newly acquired or changed properties (for instance, an enlarged plot of land) is consistent with an interest in securing property rights, even if the property is illegally acquired (for instance through claiming the land of a displaced household).14 Left-wing insurgents favored more equitable land distribution but not private property rights (Bernal Morales 2014). One way they promoted this goal was through land invasions, where poor peasants and work￾ers would occupy state lands (baldíos) or private prop￾erty. However, such invasions were typically not for￾malized legally. More common in insurgent areas was a preference for excluding or prohibiting represen￾tatives of the state from surveying the land or plot￾ting the property—necessary steps in the formalization process.15 Given the divergent preferences of and incentives for armed groups to shape local property institutions, we expect differences in local property tax perfor￾mance overall. We propose four hypotheses: In areas with substantial FARC and ELN violence: H1a Tax revenues per capita will be lower because fewer properties will be formalized. H1b Left-wing parties will tend to outperform in mayoral and municipal council elections controlling for the pre￾existing partisan balance. In areas with substantial paramilitary violence: H2a Tax revenues per capita will be higher because more property will be formalized. H2b Right-wing parties will tend to outperform in mayoral and municipal council elections controlling for the pre￾existing partisan balance. 14 Ibáñez and Muñoz (2011) find that the concentration of land be￾tween 2000 and 2009 increases as the result of an increase in plots and an increased number of plots purchased by few people. 15 Corporación Regional para el Desarrollo Sostenible del Area de Manejo Especial la Macarena (CORMACARENA) official inter￾view with the authors, Vista Hermosa, January 26, 2011. This official told us he could not conduct land surveys in the area because the FARC would not permit it. Though we expect tax revenue to be higher in areas with paramilitary presence and lower in areas with insurgent presence, we do not argue that right-wing paramilitaries or the elites that supported them fa￾vored increased taxation or that the left-wing insur￾gents opposed redistribution. Instead, armed groups’ preferences over tax rates and enforcement are am￾biguous in Colombia. Paramilitaries might try to ben￾efit supporters by pushing for lower rates and lax en￾forcement of property taxes. This position would be consistent with historical precedent in the twentieth century: Sánchez-Talanquer (2018) finds that following large-scale land reform attempts, local elites registered property in the cadaster to establish their property rights, but manipulated property value to avoid paying higher tax. At the same time, paramilitaries could ben￾efit from an increase in local tax revenue because they issued lucrative contracts to supporters to carry out municipal functions like health services (Eaton 2006; Verdad Abierta n.d.).16 New landowners could also calculate that paying taxes was a small cost to pay for securing property, and employ tax resources to expand their control over the local bureaucracy and bargaining power relative to higher levels of govern￾ment (Sánchez-Talanquer 2018; Pardelli 2018). More￾over, short-term development of specific local admin￾istrative capacities does not prevent the long-term hol￾lowing out and capture of the state (Stasavage 2014). Insurgents, though they did favor redistribution, pre￾ferred not to work through the state’s institutions be￾cause doing so would legitimate the state. The FARC issued its own tax code, targeting the wealthy in areas of their influence (see below). In terms of property rights, the insurgents preferred to impede the efforts of the state (Bernal Morales 2014) and regulate land on its own.17 Before we explain how we test our hypotheses, we first summarize temporal trends in capture over the course of the war. Civil War Dynamics and Capture in Colombia The dynamics of the civil war in terms of territorial control and violence have changed significantly over time. We separate the war’s recent evolution and the armed groups’ capture strategies into four periods and organize the statistical analysis around these four pe￾riods because pooling them would effectively assume that armed actors had the same ability to influence tax policies in every year, which strikes us as substantively unrealistic. The four periods (described in detail in Ap￾pendix H) can be defined as follows: 16 Though ideally we could test the effects of armed groups’influence on tax rates and enforcement, we do not have the data to do so. In the end, what we do test is the net effect of their influence on local property tax revenue.These data indicate that whatever is happening with tax rates and enforcement,land formalization measures increase tax revenue overall. 17 One example of the FARC’s intransigence on state-backed prop￾erty rights was its opposition to land restitution for the internally displaced through the Victims Law of 2011, calling it “legal dispos￾session” (Bernal Morales 2014). 1001 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