Conflict and fiscal capacity

A. R. Chowdhury, Syed Mansoob Murshed

    Research output: Contribution to journalArticle

    3 Citations (Scopus)

    Abstract

    We examine the role of war in retarding state fiscal capacity in developing countries, measured by tax revenue ratios to GDP. We build a simple theoretical model of a factionalized state, where patronage substitutes for common interest public goods, along with violent contestation over a rent or prize. Our dynamic panel empirical analysis applied to 79 developing countries, during 1980–2010, indicates that war, especially civil war, retards fiscal capacity, along with imperfect democracy, political repression, poor governance, and dependence on oil and macroeconomic mismanagement. High intensity conflict is particularly destructive of state capacity. In countries experiencing low intensity wars, other institutional factors may matter more than war. The diminution of fiscal capacity due to war appears less pronounced after the end of the cold war.
    Original languageEnglish
    Pages (from-to)583-608
    JournalDefence and Peace Economics
    Volume27
    DOIs
    Publication statusPublished - 9 Sep 2014

    Bibliographical note

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    Keywords

    • War
    • Civil war
    • State capacity
    • Fiscal capacity

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