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Working Paper
Foreign direct investment, aid, and terrorism: an analysis of developing countries
Using a dynamic panel data framework, we investigate the relationship between the two major forms of terrorism and foreign direct investment (FDI). We then analyze how these relationships are affected by foreign aid flows. The analysis focuses on 78 developing countries for 1984- 2008. Our findings suggest that all types of terrorism depress FDI. In addition, aid mitigates the negative effects of total and domestic terrorism on FDI; however, this is not the case for transnational terrorism. This finding highlights that different forms of terrorism call for tailoring mitigating strategies. ...
Working Paper
Immigration policy and counterterrorism
A terrorist group, based in a developing (host) country, draws unskilled and skilled labor from the productive sector to conduct attacks at home and abroad. The host nation chooses proactive countermeasures, while accounting for the terrorist campaign. Moreover, a targeted developed nation decides its optimal mix of immigration quotas and defensive counterterrorism actions. Even though proactive measures in the host country may not curb terrorism at home, it may still be advantageous in terms of national income. Increases in the unskilled immigration quota augment terrorism against the ...
Journal Article
Terrorism, Trade, and Welfare
For a standard competitive trade model, the authors show that the incidence of terrorism in different nations can affect the pattern of trade. Nations with a greater incidence of terrorism will export goods that are more immune to terrorism-related disruptions, while importing more terrorism-impacted goods. In addition, terrorism can be welfare augmenting for some nations because of terms-of-trade externalities. Finally, the authors present some qualitative conditions that identify when a nation?s trade volume may rise (or fall) in response to a greater incidence of terrorism. Given the ...
Journal Article
The Trade-Offs of Counterterrorism Policies
This article provides a modern overview of counterterrorism tools and their trade-offs for curbing terrorist attacks and their consequences. Defensive and proactive countermeasures constitute two main classes of counterterror tools deployed by targeted governments. The primary drawback of defensive actions, which make terrorist attacks more costly and less apt to succeed, is attack transference that shifts the mode, venue, or target of attacks to those less protected. In contrast, offensive proactive measures, which confront the terrorists directly, may result in backlash as terrorist ...
Working Paper
Foreign aid as counterterrorism policy
We present a model where foreign aid bolsters proactive counterterrorism efforts of a foreign nation that is a source for transnational terrorism. Our two-stage game has the donor country choosing a first-stage contract consisting of terrorism-fighting tied aid and general assistance. In stage 2, the donor decides its defensive measures, while the recipient country chooses its proactive measures. An interesting finding is that the foreign enforcement best-response function is likely to reflect strategic substitutes, while the donor's enforcement best-response function is apt to indicate ...
Journal Article
The effects of terrorism on trade: a factor supply approach
The conventional view of terrorism is that it raises risks and, as a result, reduces trade. The authors use a factor supply approach to show that this hypothesis is not necessarily correct. They use a two-good, two-factor, small open economy model to show that terrorism can either reduce or raise trade depending on critical factors, such as the impact of terrorism on the intensive factor of the export or the import sector. They then extend the analysis to models with several goods and factors and identify conditions under which trade may rise or fall with a greater incidence of terrorism. ...
Working Paper
The interplay between preemptive and defensive counterterrorism measures: a two-stage game
A two-stage game depiction of counterterrorism is presented, where the emphasis is on the interaction between the preemptive and defensive measures taken by two targeted countries facing a common threat. The preemptor is likely to be the high-cost defender with the greater foreign interests. A prime-target country may also assume the preemptor role. The analysis identifies key factors - cost comparisons, foreign interests, and targeting risks - that determine counterterrorism allocations. The study shows that the market failures associated with preemptive and defensive countermeasures may be ...
Working Paper
Immigration from a terror-prone nation: destination nation’s optimal immigration and counterterrorism policies
The paper presents a two-country model in which a destination country chooses its immigration quota and proactive counterterrorism actions in response to immigration from a terror-plagued source country. After the destination country fixes its two policies, immigrants decide between supplying labor or conducting terrorist attacks, which helps determine equilibrium labor supply and wages. The analysis accounts for the marginal disutility of lost rights/freedoms stemming from stricter counterterror measures as well the inherent radicalization of migrants. Comparative statics involve changes to ...
Working Paper
Voluntary participation in a terror group and counterterrorism policy
A three-stage game investigates how counterterrorism measures are affected by volunteers’ choice in joining a terrorist group. In stage 1, the government chooses both proactive and defensive countermeasures, while looking ahead to the anticipated size and actions of terrorist groups. After radicalized individuals choose whether to join a terrorist group in stage 2, group members then allocate their time between work and terrorist operations. Based on wages and government counterterrorism, the game characterizes the extensive margin determining group size and the intensive margin ...
Working Paper
Counterterrorism Policy: Spillovers, Regime Stability, and Corner Solutions
This paper takes a unique approach to the scenario where a resident terrorist group in a (fragile) developing nation poses a terrorism threat at home and abroad. The host developing nation’s proactive countermeasures against the resident terrorist group not only limits terrorism at home and abroad, but also bolsters regime stability at home. A two-stage game is presented in which the developed country takes a leadership role to institute a tax-subsidy combination to discourage (encourage) proactive measures at home (abroad) in stage 1. Stage 2 involves both nations’ counterterrorism ...