The Socioeconomy of Insurgency and Terror.

Prior theories of civil conflict have identified ethnic fragmentation, development status, lack of democracy, and weak governments as central causes of armed conflict within nations. Against these views, we draw on exchange norms theory to show how the level of economic dependency on the supply and demand of a market can explain the intensity of sub-national group identities and the risk of armed conflict within nations. Using data from the International Country Risk Guide on a sample of most nations from 1982 to 1997, robust support is found for this view. A measure of the intensity of market economy emerges as the most powerful variable in predicting the annual risk of armed conflict in nations, reducing the risk from 59% for nations with very weak markets, such as Guinea-Bissau and Somalia, to 1.5% for nations with highly market oriented economies, such as the United States and Sweden. Prior reports of the pacifying impacts of development and democracy are shown to be spurious and likely accounted for by market norms. Only ethnic fragmentation and extreme levels of autocracy continue to have significant, albeit less robust, impacts on armed conflict. The policy implications are straightforward: to meaningfully reduce the risk of armed conflict without resorting to extreme levels of autocracy, a state should enforce equal law and promote the condition of widespread economic opportunity on the market. ..PAT.-Conference Proceeding [ABSTRACT FROM AUTHOR]