Extortion with Protection: Understanding the Effect of Rebel Taxation on Civilian Welfare in Burundi

Using a panel data set from Burundi where information on protection payments during the twelve-year civil war was collected, we test the relationship between payments, the nature of extraction by the rebels, and the welfare outcomes. We ask, “Does payment to rebels insure against future welfare loss and does the nature of payment matter? Specifically, does the level of institutionalization of extraction within the rebel governance structure provide a form of insurance for future welfare?” No less than 30 percent of the interviewees made at least one payment. Rebels extract these taxes through one of the following two routes: an “institutionalized” and regular cash-with-receipt method or an ad hoc and unpredictable labor extraction. Using matching methods, we find that payment through the institutionalized route increases household welfare between 16 and 25 percent. Ad hoc extraction has no effect. We situate our findings in the empirical literatures on contributions to mafia-type organizations and rebel governance.