Can Hearts and Minds Be Bought? The Economics of Counterinsurgency in Iraq

We develop and test an economic theory of insurgency motivated by the informal literature and military doctrine. We model a three-way contest between violent rebels, a government seeking to minimize violence by mixing service provision and coercion, and civilians deciding whether to share information about insurgents. We test the model using panel data from Iraq on violence against Coalition and Iraqi forces, reconstruction spending, and community characteristics (sectarian status, socio-economic grievances, and natural resource endowments). Our results support the theory’s predictions: counterinsurgents direct services disproportionately to predictably violent locations, and improved service provision has reduced insurgent violence since January 2007.