NBER Working Papers by Michael J. Callen

Most aid spending by governments seeking to rebuild social and political order is based on an opportunity-cost theory of distracting potential recruits. The logic is that gainfully employed young men are less likely to participate in political violence, implying a positive correlation between unemployment and violence in locations with active insurgencies. We test that prediction in Afghanistan, Iraq and the Philippines, using survey data on unemployment and two newly-available measures of insurgency: (1) attacks against government and allied forces; and (2) violence that kills civilians. Contrary to the opportunity-cost theory, the data emphatically reject a positive correlation between unemployment and attacks against government and allied forces (p<.05%). There is no significant relatio...