18 June 2012
Ex Boccherini - Piazza S. Ponziano 6 (Conference Room )
Decentralization, widely defined as the increase in political, fiscal, and administrative autonomy of regional governments, is often proposed as an effective counterinsurgency strategy. This paper explores a particular threat to the effectiveness of decentralizing reforms in war-torn countries, namely the capture of regional governments by non-state actors. I argue that this phenomenon is influenced by the reliance on local rents of different armed organizations. In particular, paramilitary groups which main interest is to not combat the state but other insurgencies and to extract rents may be boosted by the increase in local resources associated with fiscal decentralization. This perverse relationship between fiscal autonomy and violence is explored using micro-level data on violence targeted toward local authorities in Colombia during the 1990s, decade in which scal and administrative autonomy was greatly increased. I exploit an exogenous change in the assignment mechanism employed by the central government to transfer tax revenues across regions to identify the effect of fiscal decentralization on violence. Although the evidence suggests a negative association between decentralization and violence against civilians, it also shows that the increase in fiscal resources is associated with higher murder rates of local authorities, specially in municipalities with paramilitary presence. These results are robust across a variety of specifications and consistent with the rent-seeking strategy of paramilitaries during the period. The Colombian experience calls attention to theories placing political decentralization a simple, one-dimensional strategy, against insurgencies and terrorist organizations.