The effects of illegal armed groups on municipal expenditures in Colombia

This study assesses the effects of illegal armed groups on expenditures made by municipal governments in Colombia between 2000 and 2013. Specifically, the study examines how the presence of illegal armed groups seems to affect the level of municipal expenditures, while distinguishing between capital investments and current social spending. Limits on political participation and institutional weaknesses helped to propagate the violence that disrupted Colombia in the 1970s and 1980s. Searching for solutions, Colombia transferred important decision-making responsibilities from the central government to regional and local governments. Paradoxically this decentralization opened an opportunity for illegal armed groups to play meaningful roles in local political and economic life, eventually taking control over local resources in several municipalities. To assess the role of these non-state armed groups in municipal resource allocation, our empirical analysis exploits annual data on municipal expenditures and local armed conflict. Empirical results suggest a differentiated impact on capital investments and social spending. These results are robust to multiple treatment framings and definitions.