Discussion Paper No. 73
Does the Recognition of Indigenous Territories
Impact Household Economic Situations?
Evidence from Western Panama
Gabriel Fuentes Cordoba

January , 2018

Data Science and Service Research
Discussion Paper

Center for Data Science and Service Research
Graduate School of Economic and Management
Tohoku University27-1 Kawauchi, Aobaku
Sendai 980-8576, JAPANDoes the Recognition of Indigenous Territories
Impact Household Economic Situations?
Evidence from Western Panama
Gabriel Fuentes Cordoba†
Abstract
The Government of Panama created a semi-autonomous indigenous area in 1997. The establishment of this region institutionalizes
indigenous authorities and prohibits land privatization. This study investigates the effect of the recognition of common property land to indigenous groups without centralized political culture on economic performance. By using difference-in-differences approach at householdlevel data, I find that non-migrant indigenous households living in thesemi-autonomous territory declined their consumption relative to theircounterparts living outside. Further, indigenous households inside thetreatment area are less likely to participate in agricultural market activities and they earn less monetary benefits from the market.
JEL J15, O12, O17
Keywords: Institutions, indigenous people, difference-in-differences,market participation.

1

Introduction

In 2007, 144 countries voted in favor of the United Nations Declaration on
the Rights of Indigenous People (UNDRIP) to recognize the importance ofindigenous peoples’ rights. UNDRIP indicates that indigenous peoples’ rights
to land and resources will enable them to strengthen their institutions and topromote their development. Land is the main asset that indigenous people
possess and, in many countries, they experience high levels of land tenure insecurity. Economic literature considers land property rights as a precondition
for development and previous empirical papers find a positive impact of land†
Tohoku University, Graduate School of Economics and Management, Address: 27-1
Kawauchi, Aoba-ku, Sendai, Miyagi 980-8576 JAPAN, gfuentescordoba@gmail.com

1

property rights on agricultural productivity and investments (Besley 1995;
Fenske 2013; Goldstein and Udry 2008). The rights of indigenous people toland is a topic that has gotten wide attention in multiple social sciences.
Indigenous land rights tend to be in the form of common property resources and cooperative behavior is necessary in order to manage common
property areas. A large number of indigenous groups have no history ofshared or centralized governance over their territories. Recent research has
attributed poor economic performance to the integration of people who had
no history of political centralization into jurisdictions (Dippel 2014; Gennaioli
and Rainer 2007).
This paper intends to examine whether the recognition of common property land to indigenous groups without centralized political culture have any
impact on their economic condition. I exploit the creation of an indigenous
semi-autonomous territory in western Panama in 1997 to understand this
topic. The Government of Panama with Law 10 of 1997 and the publicationof the Organic Charter (Carta Organica) in the Official Gazette in 1999 creates Comarca 1 Ngobe-Bugle in western Panama. The vast majority of the
inhabitants of the indigenous territory are members of the Ngobe and Bugle
groups.2 These ethnic groups do not share history of centralized politicalorganization and decision were made at the family-level.
The Government of Panama only granted half of the land requested by
the Ngobe-Bugle authorities. This left a portion of the indigenous people living outside the territory (Wickstrom 2003). I use a difference-in-differences
approach to examine whether the economic conditions of Ngobe-Bugle people
living inside and outside the indigenous semi-autonomous area differ acrossgroups after the recognition of Ngobe-Bugle authorities and land tenure systems.
Using a difference-in-differences methodology, I find evidence that NgobeBugle households living inside the indigenous region have lower consumption
relative to their counterparts (i.e. other Ngobe-Bugle households) outside
the indigenous area after the recognition of Comarca Ngobe-Bugle. My results are robust to the inclusion of control variables and district fixed effects.
These results can be explained by coordination failures and lack of cooperation in the indigenous territory. Lack of cooperation coupled with communal
land, decreases market attractiveness to invest in public goods and otherproductive investments (e.g. roads), increasing transaction costs for house1

Semi-autonomous indigenous regions are called Comarcas in Panama.
Ngobe and Bugle are culturally similar groups with common traditions but with different native languages. Ngobe tribe is the largest indigenous group in Panama and Ngobe
people are considered the most ancient settlers on the Isthmus of Panama. In this paper I
refer to these groups as Ngobe-Bugle people since they are the main focus of my research.
22

holds inside the indigenous area. Difference-in-differences results confirm
that agricultural market participation is lower within Comarca Ngobe-Bugle
than outside after the recognition of indigenous authorities over their land.
Further, farmers in the indigenous area are more likely to be self-sufficient,earning less from agricultural market activities.
The recognition of indigenous authorities and land tenancy systems may
impact economic outcomes since Ngobe and Bugle groups lacked centralized
political organization. One line of research investigates the impact of the creation of artificial boundaries and lack of political centralization on economic
outcomes. For example, Dippel (2014) shows that the integration of ethnic
groups with no history of centralized or shared governance reduces per capita
income in reservations in the US. The author suggests that an increase inpolitical conflict creates an uncertain business environment. As mentioned
above, the Ngobe and Bugle peoples lived in small family units without
centralized political culture. This resulted in a segmentary and acephalous
political organization (Wickstrom 2003). Recently, the Ngobe-Bugle people have displayed unity in order to obtain their land rights and to protest
against hydroelectric dam projects near their lands, however, high levels ofcorruption in their organization exists.
This paper contributes to the literature that explains the causes of underperformance of indigenous people by examining the economic impact of thecreation of an indigenous semi-autonomous region. Indigenous people are
the poorest and more vulnerable citizens of Latin America since they tend
to live in difficult-access areas, have lower education attainment, and lower
access to basic sanitation. This area of research emphasizes the significance ofinstitutions, political integration, and property rights mostly using empiricalevidence from North American aboriginals (Aragon 2015; Dippel 2014). This
paper presents new empirical evidence from an understudied group and showsthat granting rights over land is not enough to improve the socioeconomic
conditions of indigenous people.
This research relates to the effects of institutions and artificial jurisdictional boundaries on current economic performance. A large number of research use institutions to explain the differences in development throughout
the world. Acemoglu and Robinson (2001) show that the institutional choice
by a country is the main driver of cross-country income disparities today.
Similarly, Easterly and Levine (2003) conclude that institutions predominantly affect income. However, the impact of institutions as the main factor
for development is not a consensus in economic literature. Sachs (2003) argues that geography is a stronger explanatory variable to understand crosscountry income differences. Further, Michalopoulos and Papaioannou (2014)
found that cross-border differences in institutions do not translate into dif3

ferences in economic performance within partitioned ethnicities in Africa.
The rest of this paper is organized as follows. Section 2 provides a background Comarca and Ngobe Bugle people. Section 3 introduces the data andeconometric frameworks. Section 4 provides the results. Section 5 discusses
about the economic mechanisms. Finally, Section 6 concludes this research.

2

Comarca and Ngobe-Bugle people

Panama has five semi-autonomous regions where the government recognizes
the rights of indigenous people over their lands, their traditional land organizations, and their management systems (Solis et al. 2005). These regions are
considered indispensable to improve socioeconomic conditions for indigenous
peoples. However poverty, and lack of access to public goods and sanitation is pervasive in indigenous areas, especially in western Panama. In thissection I briefly discuss about the economic situation and traditions of the
Ngobe and Bugle peoples. Then, I introduce the concept of Comarca andhow it came into existence in Panama.

2.1

Ngobe and Bugle groups

Ngobe and Bugle are the two largest indigenous groups in western Panama.
According to the 2010 population census of Panama, there are 260,058 Ngobe
people and 24,912 Bugle people.3 These ethnic groups are considered themost ancient settlers of the Isthmus of Panama. Ngobe and Bugle people are
the poorest citizens of Panama, 92% of them live bellow the national poverty
line and 82% live in extreme poverty(Vakis and Lindert 2000). In the past,
Ngobe and Bugle people lived in small family units without a centralized
political culture. This resulted in a segmentary and political organization
without clear leadership (Wickstrom 2003). Ngobe-Bugle authorities andorganization mobilized to obtain legal recognition of their homeland at theend of the 1990’s, however disagreements inside their organizations about
who represents their government are common, and high levels of corruption
exist.
Ngobe and Bugle settlements are in mostly mountainous areas. Their
principal economic activities include slash-and-burn agriculture, craft production, and, to a lesser extent, unskilled labor outside the indigenous area.
Their main crops are rice, yam, corn, beans, and banana. Fruits and other3

The total indigenous population of Panama was 438,559 in 2010. There are eight
different indigenous groups in the Central American country. Each group has its own
language, traditions, and political organizations.

4permanent crops are also produced and sometimes commercialized. For example, cacao and coffee beans are their main cash crops. Some households
tend to migrate temporarily to work on banana, coffee, and other plantations.
Ngobe-Bugle traditions highly value non-economic intangibles as kinship,friendship, availability and need in order to exchange or trade (Young and
Bort, 1979). Their land tenancy system is not open access, instead land iscollectively owned by kin-group. Their main ways to have access to land arethrough inheritance, exploitation of land, and living inside the community.

2.2

Comarca

The Government of Panama is considered to have positive relationships with
its indigenous minorities since the 1970’s as it recognizes their basic humanrights (Herlihy 1995). However, poverty and extreme poverty among indigenous groups is immense. For example, in 1997, 83% percent of indigenous
people were living under the poverty line(Vakis and Lindert 2000).4
The concept of Comarca emerges after the Kuna indigenous group rebelled against the Government of Panama in 1925.5 Comarca Kuna-Yalabecomes the first semi-autonomous territory that recognizes indigenous political structure and land tenancy system in Panama.6 Thenceforth, the ideaof recognizing semi-autonomous territories for other indigenous groups becomes apparent, especially during the end of the 1960’s when Panama wasruled by a military government.7
The project of a semi-autonomous for the Ngobe and Bugle groups starts
in the 1960’s. Herrera (2012) suggests that it is not accomplished during thattime because of the following reasons: 1-Disagreements between the Ngobe
authorities and the Government of Panama about the borders of the indigenous region. 2- Large land owners and non-indigenous peasants opposed to
the Comarca project. 3- Cerro Colorado mine was near to the limits of theindigenous territory.
A considerable achievement for indigenous citizens of Panama occurred
4

Poverty is far higher among the indigenous people living within geographic “indigenous” areas as compared with their indigenous counterparts living in urban places.
5
The Kuna people’s rebellion against the Government of Panama is known as the Dule
Revolution. After long political struggles, the Government acknowledged land rights andpolitical structure of the Kuna people in eastern Panama through Law 2 of 1938.
6
Comarca Kuna Yala was considered a model to follow for other indigenous groups in
Latin America.
7
Omar Torrijos, the de facto dictator of Panama from 1968 to 1981, started a series ofsocial reforms including efforts to recognize the indigenous peoples position in the Panamanian society and to improve their living standards. Torrijos recommended indigenous
groups to organize and fight for their land rights.

5

at the beginning of the 1970’s when the Panamanian Constitution of 1972
granted indigenous peoples the rights to participate in the political system
and it introduced the notion of indigenous land rights. After this, the recognition of new indigenous semi-autonomous regions starts. Comarca NgobeBugle is created by Law 10 of 1997 and its administrative organization isrecognized by the publication of the “Carta Organica de la Comarca NgobeBugle” in the Official Gazette of Panama in 1999.
Law 10 was approved and ratified on March 7th 1997. It has 11 chaptersand clarifies the borders of the Comarca area.8 On September 9th 1999,
the “Carta Organica de la Comarca Ngobe-Bugle” is published in the Official Gazette, addressing issues as land property system, governance, justice,budget, and other crucial topics inside the Comarca area.
Collective land holding is the main land tenancy system inside the Comarca territory. “Carta Organica” and Law 10 empower Ngobe-Bugle authorities and recognize the indigenous groups’ land tenancy system. Further,
they define the borders and prohibits private land appropriation of nonindigenous peasants in Ngobe-Bugle territories.9

3

Data and Methodology

This section explains the data source, the identification strategy, and summary statistics.

3.1

Data

I use data from Living Standards Measurement Study (LSMS) by WorldBank and Panama’s Ministry of Economics and Finance at household level.
Three independent rounds have been held in 1997, 2003 and 2008, i.e. poolcross-sectional data. I use data from each round, making use of Ngobe-Bugle
farm households living in indigenous and rural areas in western Panama.
LSMS does not ask for ethnicity. Thus, I define a household as Ngobe-Bugle
if the native language of the household head is either Ngobere or Buglere.
8

Law 10 of 1997 ends a long struggle between the Ngobe-Bugle people and the Panamanian government, yet it is ambiguous about the role of tribal administration inside theComarca. After Law 10 approval, Ngobe authorities and members of the Panamanian
Government agreed to elaborate a document to explain in details different aspects about
the Comarca.
9
Carta Organica explains some especial cases where private property might be acceptable in Chapter 2 of Title 2. However, the private appropriation should be done by agroup of Ngobe-Bugle people in a collective way.

6

The first LSMS survey was collected between June and October in 1997.
This is three months after Law 10 is approved. However the effect of the creation of Comarca should not come into effect until the publication of “Carta
Organica de la Comarca Ngobe-Bugle”in the Panamanian official gazette in
1999. Therefore I use 1997 as a pretreatment period, and 2003 and 2008 astreatment periods.

3.2

Methodology

The aim of this research is to estimate the treatment effect of the creationof Comarca on economic outcomes of the Ngobe-Bugle people. In order todo so, I estimate a difference-in-differences approach to understand how the
Comarca impacts household consumption.
I examine differential trends for households living in Comarca and nonComarca regions over time. Note that both treatment and control households
are members of Ngobe-Bugle groups with similar living conditions and culture before 1997. If non-Comarca households present information on the
expected economic outcome trends for Comarca households had Law 10 not
happened, the difference-in-differences outcomes across treatment and control households should remove the impact of confounding factors and isolate
the effect of the creation of Comarca on economic outcomes.
The regression model can be written as:
yidt = βXit +γComarcaRegioni +δComarcaRegion × Post1997idt +Dd +Dt +εidt(1)
Where, yidt is an outcome variable. Xit controls for household observablecharacteristics. ComarcaRegioni is a dummy that takes the value of one if thehousehold is inside the Comarca and zero otherwise. Comarca × Post1997idt
is the interaction between treatment dummy and a time dummy variable
that takes the value of one for the years 2003 and 2008, and zero for 1997.
Dd is district dummy variable and Dt is year dummy. εidt is an error term.
The key difference-in-differences assumption is that non-Comarca households would experience the same trends in economic outcomes as Comarca
households without the treatment conditional on observable characteristics.
Table 1 indicates that socioeconomic characteristics are similar among Comarca and non-Comarca households in 1997. Log of household consumption
is not statistically significant across treatment and control households before
the institutionalization of Comarca land tenure systems and indigenous authorities. Access to piped water and electricity services is generally similar
across groups. Further, agricultural market participation, earning from tradeand income obtained from remittance is not different across groups before
7

Table 1: Summary Statistics 1997
Comarca(1)
Log household consumption
7.198(0.617)
Water service
0.268(0.444)
Electricity access
0.033(0.178)Household sells products in market
0.255(0.437)
Amount household trades in market
12.464in US dollars(51.24)
Remittance household
0.131(0.338)Persons per household
7.451(3.456)
Illiteracy
0.575(0.500)Gender (1= male)
0.830(0.377)Age of Head of Household
44.98(13.24)
No. of persons with wage
0.176
(0.474)
No. of households 1997
152
No. of households 2003
167
No. of households 2008
217

Non-ComarcaDiff.
t-value
(2)
(3)
(4)
7.331
-0.133-1.09(0.808)(0.122)
0.222
0.046
0.56
(0.422)(0.081)
0.028
0.005
-0.15
(0.167)(0.033)
0.222
0.033
0.41
(0.422)(0.080)
4.444
8.020
0.92
(17.54)(10.28)
0.111
0.020
0.32
(0.319)(0.062)6.167
1.284
2.05**(3.028)(0.626)
0.444
0.131
1.42
(0.504)(0.092)0.889-0.059-0.87(0.319)(0.068)45.81-0.825-0.33(14.37)(0.071)
0.389-0.212 -2.20**(0.688)(0.097)36
69
84

Notes: Agricultural non-migrant households. In columns 1 and 2 standard deviations
are in parentheses whereas in column 3 standard errors are in parentheses. ***, **and * stands for significance at the 1%, 5% and 10% respectively.

8

Table 2: Comarca propensity: Probit regression
Aggregated corregimiento data 1997
Average household size
0.612 (1.62)
Water service%
0.706 (0.59)
Electricity%-2.571 (-0.46)
Agriculture%
0.945 (0.47)
Average Consumption
0.029 (1.07)
Av. Consumption squared -0.000 (-1.10)
Av. Consumption cube
0.000 (1.06)
No. of corregimientos
28
Pseudo R.2
0.517
Notes: Z-values are in parentheses.

1997.
Comarca and non-Comarca households have similar demographic characteristics.10 Table 1 shows that illiteracy incidence is higher in Comarca
households however the difference across groups is not statistically significant. Number of persons per household and number of persons with wage perhousehold is statistically different across Comarca and non-Comarca households.
Some households may have preferences to live either in Comarca area
or non-Comarca area given the differences in authorities and land tenancy
systems in each particular region. If this is the case, self-selection bias ispresent and it will lead to bias results. I deal with this issue restricting thedata to non-migrant Ngobe-Bugle households to avoid self-selection bias.
I use a propensity score matching (PSM) difference in differences approach as robustness check to the baseline results from equation (1). In
this particular case, a difference-in-difference estimator will be biased if outcome changes are correlated to initial differences in the number of people perhouseholds across Comarca and non-Comarca households. The justificationof balancing on propensity scores comes from Rosenbaum and Rubin (1983).
The authors argue that if outcomes changes are independent on participation because of X, then they are also independent given the propensity score:
P (Xi ) = P r(Ti = 1 | X), (0 < P (X) < 1). And this removes selection bias
based on observable characteristics.
This study uses repeated cross-section data. I cannot calculate a propen10

Ngobe-Bugle households living in rural and indigenous areas of western Panama sharethe same culture.

9

sity score for each household based on initial conditions since I do not observe the same households at different periods. I address this issue applying apropensity score methodology at corregimiento-level, then using households
from matched corregimientos in difference-in-differences regressions. Panama
is divided into provinces, districts and corregimientos. Similarly, Comarcas
are divided into districts and corregimientos.
PSM creates a statistical comparison group based on observable covariatesthat might affect Comarca placement. Corregimientos that were assigned aspart of Comarca are largely inhabited by Ngobe-Bugle people, present low
provision of public services, and have lower average consumption than othercorregimientos in western Panama.
I balance treatment and control corregimientos in terms of initial conditions that might influence Comarca placement. First, I calculate the averageof the following variables for Ngobe-Bugle households at corregimiento-level:
number of persons per household; access to piped water; access to electricity; percentage of households engaged in agricultural activities; average consumption; and polynomial terms of initial consumption. Secondly, I estimate
a probit regression on observed covariates to obtain a propensity score atorregimiento-level. Finally, I match corregimientos based on the propensity
score using Nearest Neighbor Matching technique.
The data is restricted to a small number of corregimientos: 19 in treatment group and 9 in control group. After matching, I drop matched corregimientos that do not satisfy common support. Following Caliendo andKopeining (2008) the region of common support is defined as the overlap of
the minimum and maximum values of the propensity score in both groups.
Table 2 shows the results from the probit model for Comarca placement.
None of the variables are statistically significant. This is not surprising giventhat the data is restricted to rural and indigenous corregimientos inhabitedby Ngobe-Bugle people in western Panama. I use non-migrant Ngobe-Bugle
households from matched corregimientos to estimate the following differencein-difference regression:
yidt = βXit +γComarcaRegioni +δComarcaRegion × Post1997idt +Dd +Dt +εidt(2)
Where, yidt is an outcome variable. Xit controls for household observablecharacteristics. Comarca regioni is a dummy that takes the value of one if thehousehold is inside the Comarca and zero otherwise. Comarca × Post1997idt
is the interaction between treatment dummy and a time dummy variable
that takes the value of one for the years 2003 and 2008, and zero for 1997.
Dd is district dummy variable and Dt is a time dummy. εit is an error term.
10Appendix 1 looks at the summary statistics at household level frommatched corregimientos. This time none of the outcome variables and covariates used in this analysis are statistically different across groups. The
only exception is number of persons with wage per household which is statistically larger at the 10% in treatment households. The initial differencein that variable is the main caveat of the above estimation however I do not
expect it to be a large source of bias in the results. That aside, the PSM
approach constructs similar treatment and control groups.

4

Results

This section shows the results of the main estimations of this paper. I.e.
the effect of the recognition of indigenous authorities and land rights onhousehold consumption.

4.1

Baseline results

I focus my analyses at household-level to explore the effect of the recognitionof indigenous authorities and land rights on Ngobe-Bugle peoples living standards. I restrict the data to non-migrant Ngobe-Bugle households engaged
in agricultural activities in western Panama. The main economic activity
for Ngobe-Bugle people dwelling in indigenous and rural areas of western
Panama is semi-subsistence agriculture. Thus, I use household real consumption as a proxy variable to measure the economic situation and living
standards of these people given that various households are not participating
in a monetary economy.
Table 3 looks at the effect of the creation of Comarca on household consumption. Column 1 shows a specification without control variables and district fixed effects. Comarcaa×Post1997 is the variable of interest and it showsthat the recognition of the semi-autonomous indigenous region have a negative statistically significant effect on household consumption. In column 2, I
control for household, head of household observable characteristics, and fixed
effects. Again the effect of Comarca×Post1997 on household consumption isnegative and statistically significant. Column 1 and 2 suggest that the impactof the recognition of indigenous authorities and land tenancy system on consumption is strongly negative. Column 2 suggests that Comarca×Post1997
decreases real consumption to households inside the indigenous area around
30% relative to households outside the indigenous region.
Column 2 of Table 3 shows that persons per household is strongly positive and statistically significant. Number of persons with wage controls for11

Table 3: Effects of the creation of the Comarca on consumption

Comarca×Post1997
Comarca region
Persons per household
No. of persons with wage
in household
Illiterate dummy
Gender of household head
dummy (male=1)
Age of household headAge of household head squared
District fixed effects
Year fixed effects
Observations
R-squared

Log household consumption
Whole dataset
Matched Corregimientos
(1)
(2)
(3)
(4)
-0.557* -0.343* -0.855**-0.793*(0.270)(0.182)(0.293)(0.388)-0.133-0.2550.135
0.348(0.280)(0.263)(0.257)(0.329)0.051***
0.064***(0.010)(0.018)0.183***
0.083**(0.026)(0.027)-0.277***-0.235**(0.046)(0.084)-0.131**
0.031(0.055)(0.133)0.019**
0.018(0.008)(0.013)-0.000**-0.000(0.000)(0.000)
No
Yes
No
Yes
Yes
Yes
Yes
Yes
712
712
211
211
0.186
0.385
0.344
0.553

Notes: Non-migrant households that are engaged in agricultural activities. Columns
3 and 4 use households from matched corregimientos. Standard errors clustered at
district level in parentheses. ***, ** and * stands for significance at the 1%, 5% and
10% respectively.

12

off-farm income. Even though all households are engaged in agricultural activities, some household members sell their labor in the informal and formal
job market. As expected the coefficient of number of persons with wage
is positive and statistically significant on log consumption. Illiterate is adummy variable that takes the value of one if household head does not know
how to write and read, zero otherwise. It controls for human capital and it
has a negative effect on household consumption. Gender of household headis also a dummy variable (male=1, female=0) and it shows that gender isa strong determinant for household consumption. Ngobe-Bugle householdswith male head have lower consumption than households with female head.
Lastly, I control for age of household head. Age of household head increases
consumption and it is non-linear given that the squared term is negative.
Columns 3 and 4 of table 3 replicate the estimations of column 1 and 2, respectively, using households from matched corregimientos with a propensity
score on common support as a robustness check. The results are consistentgiven that the coefficient of interest is negative and statistically significant
at 10%.
Law 10 of 1997 and its ratification on the Official Gazette in 1999 clarify
where private appropriation of land is legally permissible and where it is
not in western Panama. Ngobe-Bugle households living outside the newsemi-autonomous region have the possibility to acquire land property rights
given that the Government of Panama together with international agencies
executed land formalization projects at the beginning of the 2000s in rural
areas. However, the impact of land regularization is more likely to benefit
non-indigenous peasants and large scale landowners because they are better
informed about the benefits of land privatization. Ngobe-Bugle traditions do
not recognize private land, impeding Ngobe-Bugle households living outside
Comarca to benefit from formalization of land (Thampy, 2013).
The results in Table 3 may be explained by the following mechanisms.
First, Ngobe-Bugle households living in Comarca territory face a worse off
market environment compared to households living outside the indigenous
area since the prohibition of land privatization may disincentivize productive
investments. Secondly, indigenous authorities need to accept projects that
the Government of Panama executes in the area, making difficult to constructpublic goods and infrastructure since Ngobe-Bugle authorities have a great
number of disagreements in their organization.11
11
The Government of Panama may not execute some projects based on discrimination
against their ethnic minorities.

13

Table 4: Road situation at community-level (%)
1997
Comarca Non-Comarca
Main road is paved
0.0
25.0
Main road is dirt road
5.3
37.5
Have the roads improved? Yes
31.6
37.5
No. of communities
19
9

Comarca
3.1
28.1
12.5
32

2003
Non-Comarca
46.7
13.3
26.7
15

Comarca
3.1
53.1
34.4
32

2008
Non-Comarca
54.5
22.7
50.0
22

Notes: Percentages.

5

Economic mechanisms

This section explores possible economic mechanisms and confounding factors to understand why Ngobe and Bugle people inside the indigenous area
are having lower levels of consumption relative to their counterparts outside
Comarca Ngobe-Bugle.

5.1

Market participation

Ngobe-Bugle communities either outside or inside Comarca region suffer fromalienation and ethnic discrimination from other members of the Panamaniansociety. Indigenous populations are under-served of all types of public goods
regardless of their geographical location in Panama.
Qualitative data suggests the existence of under-provision of roads andlack of maintenance of the existing road networks in indigenous areas. LSMS
community data asks leaders of each community about the state of road infrastructure. Table 4 shows qualitative information about the road situation
at community-level by Comarca and non-Comarca areas. LSMS asks the following question to leaders of each community: Have the road infrastructurein this community improved in the last 5 years? In 1997, 32% of the leadersfrom communities in Comarca Ngobe-Bugle and 37% of leaders from communities outside the indigenous region used in this paper answered yes to thequestion. In 2008, 34% of the community leaders from the indigenous territory agreed that the roads and access points have improved. In contrast, 50%of the community leaders outside the indigenous territory confirmed that theroads improved in 2008. Leaders perception differences about roads infrastructure improvements increases across treatment and control communities
throughout time, suggesting a larger under-provision of roads and lack ofmaintenance of the existing road networks in Comarca Ngobe-Bugle relative
to the communities outside the indigenous semi-autonomous territory. Further, a considerable number of communities do not have roads at all in the
Comarca area.
Deficient infrastructure affects agricultural market participation. Accord14

ing to the Population Census of Panama of 2000, 91% of the Ngobe-Bugle
population is engaged in agricultural activities. Households used in this paper are engaged in agricultural activities regardless of their interactions withthe market. The relationship of farm households with the market depends
on how the markets work. Lack of infrastructure investments increase transaction costs creating price bands that result in selective market failures. It
may leave a number of households to remain self-sufficient (de Janvry et al.
1991). If Ngobe-Bugle authorities are not able to organize to obtain betterroad networks after the recognition of the Comarca area, the Government ofPanama is likely to under-invests since it is not an attractive area to locate
productive investments.12
Since the recognition of the Comarca land, indigenous authorities present
disagreements about who the head of the Comarca Ngobe-Bugle governmentis, and there has been intense political conflicts (Wickstrom 2003). Market
attractiveness is affected by an increase of conflicts coupled with low capacityof indigenous leaders to negotiate with the Government of Panama to obtaininfrastructure investments.
Table 5 explores whether the recognition of indigenous authorities overtheir traditional lands affect the decision to participate in agricultural markets and the amount traded. The outcome variable in Column 1 is a dummythat takes the value of one if the household sells products in the market andzero otherwise. This regression is calculated using a linear probability model.
Column 1 shows that the coefficient of interest have negative sign and it isstatistically significant on the decision to participate in the market after including control variables and fixed effects. An agricultural household decides
whether to participate in the market or not based on fixed transaction costs.
These costs include: search for a market; negotiation and bargaining; andscreening, enforcement and supervision (Key et al. 2000).
The results in Column 1 of Table 5 suggest that the creation of the Comarca land affects agriculture market participation decisions for households
living in the indigenous area relative to control households. The number ofmarkets where farmers can sell their products are low in both sides of theindigenous area, however intermediary costs may be higher in the Comarca
region. This translates into higher search and negotiation costs related with
agricultural transactions. It is well known that infrastructure investments decrease transaction costs of trading in the market since farm households canobtain benefits from higher availability of inputs, and integration of productand factor markets (Renkow et al. 2004).
12

Discrimination against ethnic minorities coupled with indigenous authorities disputes
and prohibition of private appropriation of land might discourage investments.

15

16

Amount traded in US. dollars(2)-67.79***(22.07)26.47(26.56)2.379(2.347)9.017(15.14)-7.115(9.413)11.84*(5.645)1.799(2.021)-0.012(0.017)
Yes
Yes
712
0.078

log of amount traded(3)-1.116**(0.448)1.434***(0.371)0.010(0.021)
0.155(0.119)-0.175(0.204)0.176(0.256)-0.047(0.032)0.000(0.000)
Yess
Yes
259
0.568

Notes: Standard errors clustered at district level in parentheses. ***, ** and * stands for significance at the 1%, 5% and 10%
respectively.

Sells product in market(1)
Comarca×Post1997-0.416**(0.193)
Comarca region-0.003(0.146)
Persons per household
0.007(0.006)
No. of persons with wage
-0.022in household(0.021)
Illiterate dummy-0.030(0.036)
Gender of household head dummy
0.032(Gender=1 if male)(0.054)Age of household head
0.002
(0.007)Age of household head squared
0.000(0.000)District fixed effects
Yes
Year fixed effects
Yes
Observations
712
R-squared
0.122

Table 5: Effects of Comarca on market participation

Column 2 of Table 5 looks at the amount traded in current dollars13
after the creation of Comarca. The results indicate that households inside
the indigenous territory are earning less from agricultural trade relative totheir counterparts outside the indigenous semi-autonomous region. Column
3 explores the decision of how much to sell in the market conditional onparticipation. Column 3 shows that households in the Comarca area earn
67% less from trading relative to control households.
Construction of new roads and improvement of existing ones is a responsibility of the Ministry of Public Works in both inside and outside theindigenous area. The Government of Panama through the Ministry of Public
Works may under-invest in roads inside the indigenous region since infrastructure projects have to be consulted with Ngobe-Bugle authorities and, as
explained before, disagreements between indigenous authorities exist.
Construction of new roads and improvement of existing ones is a responsibility of the Ministry of Public Works in both inside and outside theindigenous area. The Government of Panama through the Ministry of Public
Works may under-invest in roads inside the indigenous region for the following reasons. First, in Comarca Ngobe-Bugle projects have to be consulted
to Ngobe-Bugle authorities in order to be held and, as explained before,
disagreements between indigenous authorities exist. Second, marginalization
against indigenous people translates into less levels of investment in Comarca
Ngobe-Bugle.

5.2

Investments and access to credit

I turn my attention to two other possible mechanisms that could explain the
differences in consumption across Comarca and non-Comarca households:
low cost investments and access to credit.
Individual property rights are known to affect productivity through amore efficient resource allocation. Two broad channels through which property rights impact resource allocation are: limiting expropriation and facilitating market transactions (Besley and Ghatak 2010). Land property rights
are better defined outside the indigenous area however the majority of NgobeBugle households outside the indigenous territory do not have land rights
certificates after 1997, experiencing high levels of land informality. Among
Ngobe-Bugle people, either living inside or outside the indigenous territory,
land rights depend largely on input of labor. Ngobe-Bugle land tenancy sys13

Panama has a dollarized monetary system. US. dollar and Panamanian balboa are
the official currencies of Panama since 1903. Balboa is tied to US dollar to an exchange
rate of 1:1.

17

Table 6: Comarca and investments (%)
1997 2003 2008
Seeds
Treatment
0
2
34
Control300Natural Fertilizers
Treatment0
20Control000Other Fertilizers
Treatment0
20Control000Pesticides
Treatment
5
120
Control
600Notes: Households that undertook low cost investments by group.

tem is not based on open access common property rights. Instead, use rights
are based in terms of who uses or invests labor and time.
Poorly defined land property rights raise land insecurity. High levels ofland insecurity increase constraints on investments and on access to credit. I
do not expect investments, credits, and land transfers to be potential channels
to explain the differences on consumption across groups. Households outside
Comarca Ngobe-Bugle are exposed to higher expropriation risks because of
the threat that non-indigenous peasants and large landowners represent. Table 6 shows the percentage of Ngobe-Bugle farmers that invest on seeds,
natural fertilizers, other fertilizers, and pesticides by treatment and control
group. Households living in the indigenous territory are investing more on low
cost inputs than households outside. Investment is not a possible mechanism
to understand difference in consumption after the delimitation of Comarca
borders due to the low percentage of farmers that actually invest. In fact,
higher levels of low costs investment inside the indigenous territory can beunderstood as an increase in land security for Comarca households.
Ngobe-Bugle land tenure system is based on collective land holdings by
kin group. After passing Law 10 land markets became nonexistent throughout the territory of Comarca Ngobe-Bugle. Further, as land is not owned
privately, it cannot be used as a collateral to obtain credit. Given the lackof formal land rights for households outside Comarca Ngobe-Bugle, they are
not likely to obtain loans. As Ngobe-Bugle farmers lack productive assets,
agricultural credit markets do not work for indigenous peoples.

18

19

Remittances(3)-0.015(0.051)
0.099*(0.054)-0.006*(0.003)-0.016(0.019)-0.106***(0.027)0.003(0.008)0.000(0.000)
Yes
Yes
712
0.104

Off-farm income in USD
(4)
31.86
(28.16)-14.43(41.73)5.644(4.039)-41.90**(13.88)-155.67***(23.18)
2.198(1.761)-0.008
0.017
Yes
Yes
712
0.196

Notes: Linear probability regressions in Columns 1, 2 and 3. Standard errors clustered at district level in parentheses.
***, ** and * stands for significance at the 1%, 5% and 10% respectively.

District fixed effects
Year fixed effects
Observations
R-squared

Age of household head squared

Gender of household head
dummy (male=1)
Age of household head

Illiterate dummy

Persons per household

Comarca region

Comarca× Post1997

Received wage Transfers
(1)
(2)
0.011
-0.004(0.186)(0.039)-0.113-0.083(0.158)(0.078)0.021***-0.003**(0.004)(0.001)-0.098**-0.027(0.040)(0.030)-0.120*-0.179***(0.055)(0.040)0.004-0.005*(0.007)(0.000)-0.0000.000**(0.001)(0.001)
Yes
Yes
Yes
Yes
712
712
0.153
0.219

Table 7: Comarca, wage and transfer income5.3

Other possible mechanisms

In this subsection, I explore two alternative mechanisms that could explain
the results. First, a worse off business environment in the Comarca region
may decrease off-farm work opportunities for treatment households relative
to control households. If this is the case, wage would be the main reason
why Ngobe-Bugle households outside and inside the indigenous territory havedifferent levels of consumption. Second, NPO’s, philanthropic foundations
and the Government of Panama provide financial help and transfer payments
to Ngobe-Bugle households. I do not expect this to be a relevant explanation
because households in both control and treatment areas are poor and withsimilar economic situation before 1997.
Table 7 explores possible confounding factors. Column 1 shows thatwhether someone in a household earns money from selling his or her labor iscompletely unrelated to their location across groups. The outcome variable
is a dummy that takes the value of one if someone in the household works
outside the farm and receives salary from it, zero otherwise. The results in
Column 1 of Table 7 confirm that labor market participation decision is nota mechanism to explain consumption differences.
Column 2 looks at transfer payments, monetary assistance or any othertype of financial compensation from the government, foundations or friends.
The results of Column 2 show that transfers do not change across treatment
and control group after the creation of Comarca Ngobe-Bugle. Similarly, Column 3 indicates that urban-rural remittances are not a confounding factors
since the coefficient is not statistically significant.
Column 4 looks at a household’s earnings outside the farm in current US
dollars. I construct this variable adding household’s reported off-farm income(e.g wages, transfer payments, remittances, donations, etc.). The result indicates that other earnings cannot explain the difference in consumption after
the recognition of Comarca Ngobe-Bugle.

6

Conclusion

Indigenous peoples are the poorest and most vulnerable citizens of Panama,
especially those living in indigenous and rural areas in western Panama. The
recognition of indigenous people land rights is an enormous step towards
improving the socioeconomic conditions of these groups, however this should
be done together with pro-poor policies to reduce poverty, infrastructure
projects to facilitate agricultural market transactions, and investments onother public goods to reduce the inequity gap.

20

Using data from Living Standard Measurement Survey, I demonstratethat the creation of Comarca Ngobe-Bugle is not translating into a better
economic development for indigenous populations in western Panama. On
the contrary, Ngobe-Bugle households inside the indigenous region are having lower consumption relative to their counterparts living in rural areas ofwestern Panama. The results are robust to specification checks and the maineconomic mechanism through which the creation of the Comarca area affects
consumption is agricultural market participation. Conflicts within indigenous political authorities, coupled with discrimination from the Governmentof Panama, decrease attractiveness to invest in public goods. Deficient infrastructure increases transaction costs affecting market participation.
Future research should disentangle the impact of the increase of politicalconflicts from marginalization of Ngobe-Bugle people to understand what is
the main political cause that disincentivizes investment of public goods in
Comarca Ngobe-Bugle. The results of this study should be interpreted withcaution given that the data this paper uses is repeated cross-section. An
analysis where I could observe the same households throughout time would
be preferable however, to the best of my knowledge, such data do not exist
for Ngobe-Bugle people.

21

Appendix 1: Summary Statistics 1997 from Match results

Log household consumption
Water service
Electricity accessHousehold sells products in market
Household trades in market
in US dollars
Remittance household
Persons per household
Illiteracy
Gender (1= male)Age of head of household
No. of persons with wage
No. of households 1997

Comarca(1)
6.981(0.662)0.356(0.484)0.022(0.178)0.067(0.252)
14.5(83.85)0.044(0.208)5.556(2.350)0.667(0.477)0.889(0.318)41.04(12.38)0.267(0.618)45

Non-Comarca
(2)
6.846
(0.535)0.348(0.487)0.043(0.167)0.130(0.344)3.739(12.99)0.130(0.344)5.696(3.052)0.478(0.511)
0.913(0.288)45.69(15.52)0.043(0.209)23

Diff.
t-value
(3)
(4)
0.135
0.85
(0.159)0.008
0.06(0.124)-0.021-0.48(0.044)-0.064-0.87(0.073)10.76
0.61(17.65)-0.086-1.28(0.067)-0.140-0.21(0.668)0.188
1.51(0.125)-0.024-0.31(0.079)-4.651-1.34(3.463)0.223
1.68*(0.133)

Notes: Agricultural non-migrant households. In columns 1 and 2 standard deviations
are in parentheses whereas in column 3 standard errors are in parentheses.

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