Endogenous Taxation in Ongoing Internal Conflict TABLE 3. Mechanisms:Cumulative Violence(1997-2002)and Potential Mechanisms(2003-2006) (1) 2) (3) (4) (5) (6 (7) (8) Per capita land value Cadastral update lag cadastral updates Land informality rate Log guerrilla attacks per -0.5266* -0.2841* 0.1988*0.1568* -0.0315* -0.0210* 0.0139* 0.0058* capita1997-2002 (0.1414) (0.1045) (0.0435) (0.0496) (0.0089) (0.0090) (0.0026) (0.0025) Log paramilitary attacks 0.5386* 0.3064* -0.1967*-0.1557* 0.0284* 0.0183* -0.0137* -0.0060* per capita 1997-2002 (0.1455) (0.1077) (0.0456) (0.0515) (0.0084) (0.0087) (0.0025) (0.0024) Observations 939 939 867 867 942 942 927 927 R-squared 0.361 0.445 0.293 0.298 0.450 0.462 0.515 0.574 Controls Depto.FE Pre-period tax revenue 3 Notes:Standard errors in parentheses are clustered at the department level;significance level:**0.1%,*1%,*5%,and 10%refe to two-sided t-tests.aControls as in Table 2.Due to the lack of 1993-1996 data for these dependent variables,regressions include preperiod property tax revenue per capita from 1993 to 1996 in(2).(4).(6).and(8)to pick up part of the enduring cross-sectional within-department differences torical account of the conflict(Civil War Dynamics and ber of cadastral updates carried out by a municipality Capture in Colombia section),Figures E1 and E2 sug- (columns 5 and 6),and the share of properties that lack gest that armed groups'influence decreases in the later land titles (columns 7 and 8). periods,especially for the case of paramilitaries. Consistent with our main results,cumulative past 4r元 guerrilla violence is negatively correlated with land Implications value and the number of cadastral updates,and Appendix G analyzes the implications of the influence positively correlated with the cadastral update lag and that armed groups exert on tax revenues,both for a with the land informality rate.Paramilitary violence set of education outcomes that respond to municipal- has exactly the opposite correlation signs with these specific investments and for a proxy of municipal- variables,and these results are robust to controlling for specific economic performance.T Tables G1 and G2 the pre-period tax revenue (even columns).Overall, suggest that cumulative past guerrilla violence is asso- these results suggest that guerrillas favor informal ciated with less human capital accumulation and poor land arrangements that keep state institutions at bay, and help peasants avoid formal taxes.In contrast, 是 economic performance,respectively.The opposite is true for paramilitary activity. the evidence suggests that paramilitaries favor the formal land arrangements that large land owners Mechanisms:Tax Institutions and Land prefer. Formalization Taking into account the level-log nature of the spec- ifications reported in Table 3,the substantive magni- What explains the association between violence and tude of the estimated coefficients can be computed tax performance,and particularly the heterogeneity by multiplying them with changes of interest in the across different armed groups?We expect that a key independent variable (expressed in terms of percent channel is through land formalization. changes)and dividing the product by 100.Using the Recall that the mayor is in charge of managing and specification of column 2,an increase in cumulative updating the land registry,and the city council can de- per capita guerrilla (paramilitary)attacks over the cide tax rates.tax collection mechanisms.enforcement. period 1997-2002 from the median to the ninetieth and fines.Since either or both of these government lev- percentile of the distribution is associated with an els can be captured by violent groups with vested inter- average drop (increase)of 24%(19%)of a standard ests,we explore two things:First,the extent to which deviation in average per capita land value over the pe- the intensity of the internal conflict is correlated with riod 2003-2006.Similarly,the same increase in cumu- variation in outcomes associated with the responsibili- lative per capita guerrilla violence is associated with eys ties of both the local authorities related to land formal- little over three quarters of a year delay in updating ization and taxation and,second,the extent to which the local land cadaster.In turn,the equivalent increase armed groups captured local authorities through elec- in paramilitary violence is associated with a decrease in toral outcomes. the cadastral update lag of just over half a year(column Table 3 uses the empirical specification in Equation 4).The number of cadastral updates carried out in the (1)to estimate the effect of cumulative past guerrilla municipality drops(increases)by 15%(10%)of a stan- and paramilitary violence on potential mechanisms re- dard deviation when guerrilla(paramilitary)attacks lated to the functioning of municipal tax institutions over the period 1997-2002 increase from the median to and land formalization.In particular,we look at land the ninetieth percentile(column 6).Finally,an equiv- value (columns 1 and 2).the time elapsed since the alent change in cumulative past guerrilla (paramili- last cadastral update (columns 3 and 4),the num- tary)violence is associated with an increase(decrease) 1009Endogenous Taxation in Ongoing Internal Conflict TABLE 3. Mechanisms: Cumulative Violence (1997–2002) and Potential Mechanisms (2003–2006) (1) (2) (3) (4) (5) (6) (7) (8) Per capita land value Cadastral update lag # cadastral updates Land informality rate Log guerrilla attacks per capita 1997–2002 − 0.5266∗∗∗ − 0.2841∗ 0.1988∗∗∗ 0.1568∗∗ − 0.0315∗∗ − 0.0210∗ 0.0139∗∗∗ 0.0058∗ (0.1414) (0.1045) (0.0435) (0.0496) (0.0089) (0.0090) (0.0026) (0.0025) Log paramilitary attacks per capita 1997–2002 0.5386∗∗∗ 0.3064∗∗ − 0.1967∗∗∗ -0.1557∗∗ 0.0284∗∗ 0.0183∗ − 0.0137∗∗∗ − 0.0060∗ (0.1455) (0.1077) (0.0456) (0.0515) (0.0084) (0.0087) (0.0025) (0.0024) Observations 939 939 867 867 942 942 927 927 R-squared 0.361 0.445 0.293 0.298 0.450 0.462 0.515 0.574 Controlsa √ √ √ √√ √ √ √ Depto. FE √ √ √ √√ √ √ √ Pre-period tax revenueb √ √√ √ Notes: Standard errors in parentheses are clustered at the department level; significance level: *∗* 0.1%, ** 1%, * 5%, and + 10% refer to two-sided t-tests. aControls as in Table 2. bDue to the lack of 1993–1996 data for these dependent variables, regressions include preperiod property tax revenue per capita from 1993 to 1996 in (2), (4), (6), and (8) to pick up part of the enduring cross-sectional within-department differences. torical account of the conflict (Civil War Dynamics and Capture in Colombia section), Figures E1 and E2 sug￾gest that armed groups’ influence decreases in the later periods, especially for the case of paramilitaries. Implications Appendix G analyzes the implications of the influence that armed groups exert on tax revenues, both for a set of education outcomes that respond to municipal￾specific investments and for a proxy of municipal￾specific economic performance. Tables G1 and G2 suggest that cumulative past guerrilla violence is asso￾ciated with less human capital accumulation and poor economic performance, respectively. The opposite is true for paramilitary activity. Mechanisms: Tax Institutions and Land Formalization What explains the association between violence and tax performance, and particularly the heterogeneity across different armed groups? We expect that a key channel is through land formalization. Recall that the mayor is in charge of managing and updating the land registry, and the city council can de￾cide tax rates, tax collection mechanisms, enforcement, and fines. Since either or both of these government lev￾els can be captured by violent groups with vested inter￾ests, we explore two things: First, the extent to which the intensity of the internal conflict is correlated with variation in outcomes associated with the responsibili￾ties of both the local authorities related to land formal￾ization and taxation and, second, the extent to which armed groups captured local authorities through elec￾toral outcomes. Table 3 uses the empirical specification in Equation (1) to estimate the effect of cumulative past guerrilla and paramilitary violence on potential mechanisms re￾lated to the functioning of municipal tax institutions and land formalization. In particular, we look at land value (columns 1 and 2), the time elapsed since the last cadastral update (columns 3 and 4), the num￾ber of cadastral updates carried out by a municipality (columns 5 and 6), and the share of properties that lack land titles (columns 7 and 8). Consistent with our main results, cumulative past guerrilla violence is negatively correlated with land value and the number of cadastral updates, and positively correlated with the cadastral update lag and with the land informality rate. Paramilitary violence has exactly the opposite correlation signs with these variables, and these results are robust to controlling for the pre-period tax revenue (even columns). Overall, these results suggest that guerrillas favor informal land arrangements that keep state institutions at bay, and help peasants avoid formal taxes. In contrast, the evidence suggests that paramilitaries favor the formal land arrangements that large land owners prefer. Taking into account the level-log nature of the spec￾ifications reported in Table 3, the substantive magni￾tude of the estimated coefficients can be computed by multiplying them with changes of interest in the independent variable (expressed in terms of percent changes) and dividing the product by 100. Using the specification of column 2, an increase in cumulative per capita guerrilla (paramilitary) attacks over the period 1997–2002 from the median to the ninetieth percentile of the distribution is associated with an average drop (increase) of 24% (19%) of a standard deviation in average per capita land value over the pe￾riod 2003–2006. Similarly, the same increase in cumu￾lative per capita guerrilla violence is associated with little over three quarters of a year delay in updating the local land cadaster. In turn, the equivalent increase in paramilitary violence is associated with a decrease in the cadastral update lag of just over half a year (column 4). The number of cadastral updates carried out in the municipality drops (increases) by 15% (10%) of a stan￾dard deviation when guerrilla (paramilitary) attacks over the period 1997–2002 increase from the median to the ninetieth percentile (column 6). Finally, an equiv￾alent change in cumulative past guerrilla (paramili￾tary) violence is associated with an increase (decrease) 1009 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