Kyle Meng points us to this recent NBER working paper. See this related post and this one too.
Building Peace: The Impact of Aid on the Labor Market for Insurgents
by Radha Iyengar, Jonathan Monten, Matthew Hanson
Abstract: Employment growth could reduce violence during civil conflicts. To determine if increased employment affects violence we analyzed varying employment in development programs run by different US military divisions in Iraqi districts. Employment levels vary with funding periods and the military division in charge. Controlling for
variability between districts, we find that a 10% increase in labor-related spending generates a 15-20% decline in labor-intensive insurgent violence. Overall the 10% spending increase is associated with a nearly 10% violence reduction, due to reduction in attacks which kill civilians, but increased attacks against the military. These findings indicate that labor-intensive development programs can reduce violence during insurgencies.