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

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  • Diana Ricciulli

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.

Suggested Citation

  • Diana Ricciulli, 2020. "The Fiscal Cost of Conflict: Evidence from La Violencia in Colombia," Documentos CEDE 18537, Universidad de los Andes, Facultad de Economía, CEDE.
  • Handle: RePEc:col:000089:018537
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    More about this item

    Keywords

    Fiscal capacity; Internal conflict; La Violencia; Colombia;
    All these keywords.

    JEL classification:

    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean

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