Banditry or Business? Rebel Labor Markets and State Economic Intervention

Stationary banditry is ubiquitous in civil war, with some rebel groups even investing in and profiting from primary commodities for years or decades. But for many of these groups, labor is a necessary component of resource production, such that laborers' economic participation is vital for rebel funding and survival. States, meanwhile, are eager to prevent rebels from establishing these economic footholds. In areas where rebels can assert control of primary commodity markets, military competition between states and rebels may be supplemented by economic competition over laborers' efforts. Under what conditions do governments wage local economic war by providing incentives to laborers to minimize the appeal of economically partnering with rebels? I argue that laborers' economic loyalty is a central and under-considered component to resource-driven conflicts. When rebels seek to establish stationary banditry, states incentivize laborers to participate in the legal economy rather than rebel-controlled markets. Specifically, states will pursue economic counterinsurgency policies in areas where rebels are most likely to profit from labor-intensive primary commodities. I find support for this argument using municipal-level Colombian data about the FARC's involvement in the coca trade and government provision of agricultural credits.