Working Paper: NBER ID: w18375
Authors: Eli Berman; Joseph Felter; Ethan Kapstein; Erin Troland
Abstract: The literature relating economic activity to political violence posits greedy rebels (Collier, 2000) but not greedy governments. Could capturing tax revenue motivate governments to step up their counter insurgency operations, just as extortion motivates rebel violence? Panel data on political violence in the Philippines distinguish government from rebel attacks, which we link to private investment across 70 provinces. To formally explore these data we expand an established theory of asymmetric substate conflict –the “information-centric” model, adding firms, investment, taxation and predation (i.e., extortionary violence by rebels in response to investment) to the interplay of government, rebels and civilians, generating testable implications. The data show that increases in investment predict increases in both government-initiated attacks and rebel-initiated attacks. In the year following increased investment government attacks decrease. In the context of our expanded model, these empirical results suggest that both rebels and governments contest economic rents.
Keywords: investment; violence; predation; taxation; Philippines
JEL Codes: F52; F54; H41; H56; K42; N47; O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Government attacks decrease (H56) | Violence (D74) |
| Investment (G31) | Government-initiated attacks (H56) |
| Investment (G31) | Rebel-initiated attacks (D74) |
| Investment (G31) | Government attacks (H56) |
| Investment (G31) | Violence (D74) |
| Rebel-initiated attacks (D74) | Violence (D74) |