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An Economic Analysis of Security Policies

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  • Tilman Brück

Abstract

This paper analyses public policy choices in the security economy from an economic perspective. It discusses the role of public goods for national and global security and identifies the importance of the first- and second-order indirect effects of insecurity on economic activity, which include the behavioural responses of agents and the government to security measures, akin to such effects in insurance economics. Furthermore, key public policy trade-offs are outlined, in particular between security and efficiency, globalisation, equity and freedom. The analysis identifies suitable policy options for raising security in the national and international contexts and in view of these trade-offs. A suitable balance between market and non-market instruments in achieving security should be aimed for to minimise the adverse effects of aiming for higher security. In addition, the public good nature of security implies that international coordination of security policies is important, despite this process being itself fraught with enforcement problems.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.42661.de/dp456.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 456.

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Length: 26 p.
Date of creation: 2004
Date of revision:
Publication status: Published in: Defence & Peace Economics 16 (2005), 5, 375-389
Handle: RePEc:diw:diwwpp:dp456

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Keywords: Collective goods; Public policy; Regulation; Risk; Security; Terrorism;

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References

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  1. Hummels, David, 2001. "Time as a Trade Barrier," GTAP Working Papers 1152, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  2. Ram, Rati, 1995. "Defense expenditure and economic growth," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 10, pages 251-274 Elsevier.
  3. Nitsch, Volker & Schumacher, Dieter, 2004. "Terrorism and international trade: an empirical investigation," European Journal of Political Economy, Elsevier, vol. 20(2), pages 423-433, June.
  4. Sandler, Todd & Enders, Walter, 2004. "An economic perspective on transnational terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 301-316, June.
  5. Bart Hobijn, 2002. "What will homeland security cost?," Economic Policy Review, Federal Reserve Bank of New York, issue Nov, pages 21-33.
  6. Bruno S. Frey & Simon Luechinger, . "How to Fight Terrorism: Alternatives to Deterrence," IEW - Working Papers 137, Institute for Empirical Research in Economics - University of Zurich.
  7. Edward L. Glaeser & Jesse M. Shapiro, 2001. "Cities and Warfare: The Impact of Terrorism on Urban Form," Harvard Institute of Economic Research Working Papers 1942, Harvard - Institute of Economic Research.
  8. Howard Kunreuther & Erwann Michel-Kerjan & Beverly Porter, 2003. "Assessing, Managing, and Financing Extreme Events: Dealing with Terrorism," NBER Working Papers 10179, National Bureau of Economic Research, Inc.
  9. Todd Sandler, 2005. "Collective versus unilateral responses to terrorism," Public Choice, Springer, vol. 124(1), pages 75-93, July.
  10. Glaeser, Edward L. & Shapiro, Jesse M., 2002. "Cities and Warfare: The Impact of Terrorism on Urban Form," Journal of Urban Economics, Elsevier, vol. 51(2), pages 205-224, March.
  11. Todd Sandler, 2003. "Collective Action and Transnational Terrorism," The World Economy, Wiley Blackwell, vol. 26(6), pages 779-802, 06.
  12. Kunreuther, Howard & Heal, Geoffrey, 2003. " Interdependent Security," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 231-49, March-May.
  13. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
  14. Patrick Lenain & Marcos Bonturi & Vincent Koen, 2002. "The Economic Consequences of Terrorism," OECD Economics Department Working Papers 334, OECD Publishing.
  15. William D. Nordhaus, 2002. "The Economic Consequences of a War with Iraq," Cowles Foundation Discussion Papers 1387, Cowles Foundation for Research in Economics, Yale University.
  16. Chen, Andrew H. & Siems, Thomas F., 2004. "The effects of terrorism on global capital markets," European Journal of Political Economy, Elsevier, vol. 20(2), pages 349-366, June.
  17. Sunstein, Cass R, 2003. " Terrorism and Probability Neglect," Journal of Risk and Uncertainty, Springer, vol. 26(2-3), pages 121-36, March-May.
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Citations

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Cited by:
  1. Friedrich Schneider & Tilman Brück & Daniel Meierrieks, 2010. "The Economics of Terrorism and Counter-Terrorism: A Survey (Part II)," CESifo Working Paper Series 3012, CESifo Group Munich.
  2. Brauer1, Jurgen & Haywood, Robert, 2010. "Non-state Sovereign Entrepreneurs and Non-territorial Sovereign Organizations," Working Paper Series UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).
  3. Michael McBride & Gary Richardson, 2010. "Stopping Suicide Attacks: Optimal Strategies and Unintended Consequences," NBER Working Papers 16637, National Bureau of Economic Research, Inc.
  4. Kollias, Christos & Messis, Petros & Mylonidis, Nikolaos & Paleologou, Suzanna-Maria, 2009. "Terrorism and the effectiveness of security spending in Greece: Policy implications of some empirical findings," Journal of Policy Modeling, Elsevier, vol. 31(5), pages 788-802, September.
  5. Schneider, Friedrich, 2010. "The (Hidden) Financial Flows of Terrorist and Organized Crime Organizations: A Literature Review and Some Preliminary Empirical Results," IZA Discussion Papers 4860, Institute for the Study of Labor (IZA).
  6. Xiao, Fenglong, 2011. "When organization encounters uncertainty in regulatory times," MPRA Paper 36240, University Library of Munich, Germany.
  7. Kollias, Christos & Papadamou, Stephanos & Stagiannis, Apostolos, 2011. "Terrorism and capital markets: The effects of the Madrid and London bomb attacks," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 532-541, October.

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