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Foreign aid as counterterrorism policy

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Author Info

  • Subhayu Bandyopadhyay
  • Todd Sandler
  • Javed Younas

Abstract

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 strategic complementarity. A rise in terrorism in the donor increases home enforcement but may limit foreign enforcement at given aid levels. A rich set of scenarios depends on the strategic identity of the countries' countermeasures and the recipient's regime stability. Surprising and varied outcomes follow.

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Bibliographic Info

Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2009-021.

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Date of creation: 2009
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Handle: RePEc:fip:fedlwp:2009-021

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Keywords: Terrorism ; War - Economic aspects;

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References

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  1. Jean-Paul Azam & Véronique Thelen, 2008. "The roles of foreign aid and education in the war on terror," Public Choice, Springer, vol. 135(3), pages 375-397, June.
  2. Sandler, Todd & Lapan, Harvey E., 1988. "The Calculus of Dissent: An Analysis of Terrorists' Choice of Targets," Staff General Research Papers 10818, Iowa State University, Department of Economics.
  3. Khusrav Gaibulloev & Todd Sandler, 2008. "Growth Consequences of Terrorism in Western Europe," Kyklos, Wiley Blackwell, vol. 61(3), pages 411-424, 08.
  4. Subhayu Bandyopadhyay & Todd Sandler, 2011. "The Interplay Between Preemptive and Defensive Counterterrorism Measures: A Two‐stage Game," Economica, London School of Economics and Political Science, vol. 78(311), pages 546-564, 07.
  5. Todd Sandler & Kevin Siqueira, 2006. "Global terrorism: deterrence versus pre-emption," Canadian Journal of Economics, Canadian Economics Association, vol. 39(4), pages 1370-1387, November.
  6. Azam, Jean-Paul & Delacroix, Alexandra, 2004. "Aid and the Delegated Fight against Terrorism," IDEI Working Papers 324, Institut d'Économie Industrielle (IDEI), Toulouse, revised Jul 2005.
  7. Konstantinos Drakos & Andreas Gofas, 2006. "In Search Of The Average Transnational Terrorist Attack Venue," Defence and Peace Economics, Taylor & Francis Journals, vol. 17(2), pages 73-93.
  8. B. Curtis Eaton, 2004. "The elementary economics of social dilemmas," Canadian Journal of Economics, Canadian Economics Association, vol. 37(4), pages 805-829, November.
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Citations

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Cited by:
  1. Prabal Roy Chowdhury & Jaideep Roy, 2011. "Aid in times of terror," Indian Statistical Institute, Planning Unit, New Delhi Discussion Papers 11-08, Indian Statistical Institute, New Delhi, India.
  2. Joseph Young & Michael Findley, 2011. "Can peace be purchased? A sectoral-level analysis of aid’s influence on transnational terrorism," Public Choice, Springer, vol. 149(3), pages 365-381, December.
  3. Khusrav Gaibulloev & Todd Sandler & Donggyu Sul, . "Reevaluating Terrorism and Economic Growth: Dynamic Panel Analysis and Cross-Sectional Dependence," Economics Working Papers 02-03/2013, School of Business Administration, American University of Sharjah.
  4. Azam, Jean-Paul & Thelen, Véronique, 2012. "Where to Spend Foreign Aid to Counter Terrorism," TSE Working Papers 12-316, Toulouse School of Economics (TSE).
  5. S. Blomberg & Khusrav Gaibulloev & Todd Sandler, 2011. "Terrorist group survival: ideology, tactics, and base of operations," Public Choice, Springer, vol. 149(3), pages 441-463, December.
  6. Subhayu Bandyopadhyay & Todd Sandler, 2011. "Immigration policy and counterterrorism," Working Papers 2011-012, Federal Reserve Bank of St. Louis.
  7. Subhayu Bandyopadhyay & E. Katarina Vermann, 2013. "Donor motives for foreign aid," Review, Federal Reserve Bank of St. Louis, issue July, pages 327-336.
  8. Navin Bapat, 2011. "Terrorism, democratization, and US foreign policy," Public Choice, Springer, vol. 149(3), pages 315-335, December.
  9. Todd Sandler, 2011. "The many faces of counterterrorism: an introduction," Public Choice, Springer, vol. 149(3), pages 225-234, December.
  10. Claude Berrebi & Jordan Ostwald, 2011. "Earthquakes, hurricanes, and terrorism: do natural disasters incite terror?," Public Choice, Springer, vol. 149(3), pages 383-403, December.
  11. Axel Dreher & Andreas Fuchs, 2011. "Does terror increase aid?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 86, Courant Research Centre PEG.
  12. Axel Dreher & Andreas Fuchs, 2011. "Does terror increase aid?," Public Choice, Springer, vol. 149(3), pages 337-363, December.

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