Notes on Optimal Reintegration Contracts

Disarmament, Demobilization, and Reintegration (DDR) programs are known to be a necessary component to achieve sustainable peace after an armed conflict. The main goal of this type of program is to help the transition for former soldiers from war to a sustainable legal economic activity. However, due to weak institutions and poor design and implementation, such programs often result in many former soldiers ending up unemployed, in criminal activities, or returning to armed rebel groups. In this paper, I propose an optimal reintegration contract using tools from unemployment insurance literature. In this model, a principal (government) collects taxes from the community to fund a reintegration program that gives incentives to agents (insurgent soldiers) to leave war and search for a job. I describe how information asymmetries and the conditions of labor and crime markets shape the benefits scheme offered by the principal and the selection of insurgents who join the reintegration program.