Market for Allies

A new NBER paper looks at the question.

Can Hearts and Minds Be Bought? The Economics of Counterinsurgency in Iraq by Eli Berman, Jacob N. Shapiro, Joseph H. Felter
Abstract:

Rebuilding social and economic order in conflict and post-conflict areas will be critical for the United States and allied governments for the foreseeable future. Little empirical research has evaluated where, when, and how improving material conditions in conflict zones enhances social and economic order. We address this lacuna, developing and testing a theory of insurgency. Following the informal literature and US military doctrine, we model insurgency as a three-way contest between rebels seeking political change through violence, a government seeking to minimize violence through some combination of service provision and hard counterinsurgency, and civilians deciding whether to share information about insurgents with government forces. We test the model using new data from the Iraq war. We combine a geo-spatial indicator of violence against Coalition and Iraqi forces (SIGACTs), reconstruction spending, and community characteristics including measures of social cohesion, sectarian status, socio-economic grievances, and natural resource endowments. Our results support the theory's predictions:
counterinsurgents are most generous with government services in locations where they expect violence; improved service provision has reduced insurgent violence since the summer of 2007; and the violence-reducing effect of service provision varies predictably across communities.

http://papers.nber.org/papers/W14606