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Extortion with Protection: Understanding the Effect of Rebel Taxation on Civilian Welfare in Burundi

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  • Rachel Sabates-Wheeler
  • Philip Verwimp

Abstract

Using a panel dataset from Burundi where information on protection payments during the 10 year civil war were collected, we test the relationship between payments, the nature of extraction by the rebels, and welfare outcomes. We ask, does payment to rebels insure against future welfare loss and does the nature of payment matter? Specifically, does the level of institutionalisation of extraction within the rebel governance structure provide a form of insurance for future welfare? No less than 30% of the interviewees made at least one payment. Rebels extract these taxes through one of two routes: an ‘institutionalised’ and regular cash-with-receipt method or an ad hoc and unpredictable labour extraction. Using matching methods we find that payment through the institutionalised route increases household welfare between 16 and 25%. Ad hoc extraction has no effect. We situate our findings in the empirical literatures on contributions to mafia-type organisations and rebel governance.

Suggested Citation

  • Rachel Sabates-Wheeler & Philip Verwimp, 2014. "Extortion with Protection: Understanding the Effect of Rebel Taxation on Civilian Welfare in Burundi," Working Papers ECARES ECARES 2014-06, ULB -- Universite Libre de Bruxelles.
    • Handle: RePEc:eca:wpaper:2013/155694
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    References listed on IDEAS

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    1. Halvor Mehlum & Karl Ove Moene & Ragnar Torvik, 2002. "Plunder & Protection Inc," Journal of Peace Research, Peace Research Institute Oslo, vol. 39(4), pages 447-459, July.
    2. Emily Oster, 2013. "Unobservable Selection and Coefficient Stability: Theory and Validation," NBER Working Papers 19054, National Bureau of Economic Research, Inc.
    3. Konrad, Kai A. & Skaperdas, Stergios, 1997. "Credible threats in extortion," Journal of Economic Behavior & Organization, Elsevier, vol. 33(1), pages 23-39, May.
    4. Alastair Smith & Federico Varese, 2001. "Payment, Protection And Punishment," Rationality and Society, , vol. 13(3), pages 349-393, August.
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    Cited by:

    1. Travers Barclay Child, 2020. "Losing Hearts & Minds: Aid and Ideology," HiCN Working Papers 328, Households in Conflict Network.
    2. Neu, Dean, 2023. "Fragile assets: Street gangs and the extortion business," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 95(C).
    3. Lionel Jeusette & Philip Verwimp, 2017. "Childhood aspirations, occupational outcomes and exposure to violence: Evidence from Burundi," HiCN Working Papers 247, Households in Conflict Network.
    4. Travers B Child, 2023. "Losing Hearts & Minds: Aid and Ideology," Journal of Conflict Resolution, Peace Science Society (International), vol. 67(2-3), pages 457-493, February.
    5. Neu, Dean, 2019. "Accounting for extortion," Accounting, Organizations and Society, Elsevier, vol. 76(C), pages 50-63.

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    More about this item

    Keywords

    extortion; taxation; forced labour; welfare; rebellion; Africa;
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