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Predation, Taxation, Investment, and Violence: Evidence from the Philippines

  • Eli Berman
  • Joseph Felter
  • Ethan Kapstein
  • Erin Troland

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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18375.

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Date of creation: Sep 2012
Date of revision:
Handle: RePEc:nbr:nberwo:18375
Note: PE POL
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  1. Paul Collier & V. L. Elliott & Håvard Hegre & Anke Hoeffler & Marta Reynal-Querol & Nicholas Sambanis, 2003. "Breaking the Conflict Trap : Civil War and Development Policy," World Bank Publications, The World Bank, number 13938.
  2. Timothy Besley & Hannes Mueller, 2009. "Estimating the Peace Dividend:The Impact of Violence on HousePrices in Northern Ireland," STICERD - Economic Organisation and Public Policy Discussion Papers Series 011, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
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  13. Benjamin Crost & Joseph Felter & Patrick Johnston, 2014. "Aid under Fire: Development Projects and Civil Conflict," American Economic Review, American Economic Association, vol. 104(6), pages 1833-56, June.
  14. David Fielding, 2003. "Modelling Political Instability and Economic Performance: Israeli Investment during the "Intifada"," Economica, London School of Economics and Political Science, vol. 70(277), pages 159-186, February.
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