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Where to Spend Foreign Aid to Counter Terrorism

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  • Azam, Jean-Paul
  • Thelen, Véronique

Abstract

A simple game-theoretic model is first presented to bring out the conditions for terrorist organizations to choose to perpetrate their attacks in a host country other than at home. This emphasizes the diluted impact of counter-terrorism measures implemented in the host-country on the number of attacks taking place there. These measures might attract more imported attacks and mainly impact the number of attacks exported by the domestic terrorists without affecting much the overall level of terrorist activity in the host country. The empirical results presented provide some support to this prediction, by contrasting the econometric equations that explain the number of attacks per country of origin vs. per host country. A dyadic analysis is also presented. These analyses confirm the role of foreign aid as a counterterrorism measure in the source country, but it raises the issue of its role in the host country. Although foreign aid is confirmed as an effective tool for reducing the total number of attacks produced, it affects the venue of these terrorist attacks. Military interventions are mostly counterproductive, as they seem to be a strong attraction factor for terrorists.

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Paper provided by Institut d'Économie Industrielle (IDEI), Toulouse in its series IDEI Working Papers with number 725.

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Date of creation: Jun 2012
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Handle: RePEc:ide:wpaper:25950

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  1. Subhayu Bandyopadhyay & Todd Sandler & Javed Younas, 2011. "Foreign direct investment, aid, and terrorism: an analysis of developing countries," Working Papers 2011-004, Federal Reserve Bank of St. Louis.
  2. Fleck, Robert K. & Kilby, Christopher, 2009. "Changing Aid Regimes? U.S. Foreign Aid from the Cold War to the War on Terror," Villanova School of Business Department of Economics and Statistics Working Paper Series 1, Villanova School of Business Department of Economics and Statistics.
  3. Subhayu Bandyopadhyay & Todd Sandler & Javed Younas, 2011. "Foreign aid as counterterrorism policy," Oxford Economic Papers, Oxford University Press, vol. 63(3), pages 423-447, July.
  4. Campos, Nauro F & Gassebner, Martin, 2009. "International Terrorism, Political Instability and the Escalation Effect," IZA Discussion Papers 4061, Institute for the Study of Labor (IZA).
  5. Axel Dreher & Andreas Fuchs, 2011. "Does terror increase aid?," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 86, Courant Research Centre PEG.
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