State (In)security: The Impact of Insurgencies on Economic Integration

Abstract

Why do we witness divergent levels of economic integration around the world? Predominant explanations focus on the dampening effect of inter-state conflict on integration. However, internal security considerations have received little attention. I hypothesize that states dealing with domestic insurgencies are less likely to pursue economic integration strategies. If a state’s sovereignty is challenged from within, then the state will be reluctant to give up its sovereign power internationally through institutions like trade agreements.

My argument is that states suffer from sovereign insecurity along three dimensions when considering economic integration: material infrastructure, policy restrictions, and precedent setting. Materially, states will be reluctant to integrate when dealing with insurgencies because integration involves setting up infrastructure on the ground to facilitate the free movement of goods (and often people), which insurgents can use to their advantage. Economic integration also involves the state diluting its sovereign rights. States agree to let go of their decision-making power on certain issues that enable integration, which means they lose control of policy-making. Finally, the state will not wish to send a signal to domestic audiences that implies its willingness to cede sovereignty in certain circumstances since this might set a precedent to negotiate sovereignty in other circumstances.

A multi-method research design provides evidence of this negative relationship between insurgencies and the depth of economic integration. Quantitative models using cross-national data on economic integration depth show lower levels of integration for insurgency-ridden states. I trace the causal mechanism with a case study of India that includes original archival and interview data collected during fieldwork. My research highlights the under-explored unintended negative economic externalities of substate conflict.