NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by Ethan B. Kapstein

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Working Papers

August 2013Predation, Taxation, Investment and Violence: Evidence from the Philippines
with Eli Berman, Joseph Felter, Erin Troland: w19266
This paper explores the relationship between investment and political violence through several possible mechanisms. Investment as a predictor of future violence implies that low private sector investment today provides a robust indicator of high violence tomorrow. "Rent-capture" or predation asserts that investment increases violence by motivating extortion by insurgents. A "hearts and minds" approach links investment to political violence in two possible ways: through an opportunity cost mechanism by which improved economic conditions raise the cost of rebel recruitment; and through a psychological "gratitude" effect which reduces cooperation of noncombatants with rebels. Finally, tax capture implies that government will increase coercive enforcement in an attempt to control areas where i...
September 2012Predation, Taxation, Investment, and Violence: Evidence from the Philippines
with Eli Berman, Joseph Felter, Erin Troland: w18375
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 pre...

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