A state is defined as “failed†or “fragile†when it is unable to perform its core functions and displays vulnerability in the social, political, and economic domains. To identify the determinants of state fragility, an econometric analysis has been carried out to explain vulnerability in the economic, political, and social sectors of a country in a structural simultaneous equations framework. Failed States Index (FSI) data of 149 countries for the year 2007 has been used. The results support the hypothesis that there is a great degree of simultaneity in the vulnerability in these three domains and together they determine a country’s fragility/stability. It is seen that social vulnerability impacts political and economic vulnerability significantly, whereas political vulnerability has a definite effect on social vulnerability but not on economic vulnerability. Economic vulnerability has a limited effect on the vulnerability in the other two spheres – in the sense that a single dimension alone (either income level or income inequality but not both) appears to impact vulnerability in the social and political domains. The insignificant effect of political vulnerability on economic vulnerability is surprising. One plausible explanation is that political vulnerability may lead to economic vulnerability with a lag, while this study is based on data at a single point in time. However, further research is needed on this aspect. The broad policy implication of the study is that, to rebuild capacity in highly fragile or failed states, priority should be accorded to addressing social vulnerability through immediate political measures, followed by long-term initiatives to promote economic development.
