Using the synthetic control method of analysis, we provide the first
measurements of the direct economic benefits of a unique robust security response to an
insurgency. Of all the states affected by Naxalite violence in India, only one state i.e.
Andhra Pradesh raised a specially trained and equipped police force in 1989 known as the
Greyhounds, dedicated mainly to combating the Naxalite insurgency. Compared to a
synthetic control region constructed from states affected by Naxalite violence that did not
raise a specially trained anti-Naxalite police force, we find that Andhra Pradesh gained on
average 16.11% of its per capita NSDP over the period 1989 to 2000. The effects on the
various subsectors of the non-agricultural sector range from approximately 11% to 25%.
Placebo tests indicate that all results are significant. Standard difference-in-difference
specifications at the state and industry level further corroborate these findings.