Can Countries Buy Their Way Out of Insurgencies? Evidence from Iraq.∗

The academic community has yet to settle on the manner and mechanisms by which economics-based counterinsurgency initiatives affect violence levels. This piece considers the effect of local-business revitalization initiatives on insurgent violence by analyzing Iraqi First, an initiative implemented by the U.S. military in Iraq through which billions of dollars were committed to local commodity and service purchases. Results generated with a two-stage least squares model provide evidence that spending on locally sourced goods and services through Iraqi First was responsible for reducing attacks on Coalition targets during the study period. The results remain robust even as significant violations to the exclusion restriction are imposed.