Political Regimes and the Determinants of Terrorism and Counter-terrorism

Why do some democratic governments react weakly to terrorism, while apparently similar regimes react harshly? More generally, what are the determinants of governments' reaction to terrorism? And, what are the determinants of terrorism and of its dynamic? In this paper we focus on domestic terrorism and counter-terrorism as affected by economic development, political heterogeneity, citizens' human capital, and government accountability and responsiveness. The empirical research has not reached a consensus on the socioeconomic determinants of terrorism. A possible explanation is that observable data may depend on hidden causal links that are not simply caught by standard regressions. In this paper we argue that terrorism activities are endogenous to the governments' counter-terrorism choices, which in turn does depend on political and socioeconomic factors. Our basic point is that both causes and consequences of terror can only be understood in terms of strategic interaction among political actors, primarily government and citizens. We propose a model that considers human capital, economic development, political heterogeneity, government responsiveness and accountability as possible factors influencing terrorism and the government's response. We show that the game has three possible equilibrium outcomes, uniquely determined by our parameters: a Strong Regime characterized by no terrorism, high counter-terrorism and increasing protests, a Flexible Regime characterized by low terrorism which increase or decrease according to the random reaction of the government, and a Permissive Regime characterized by terrorism activity, no counter-terrorism and no protests. We also show that it is possible for a democratic regime to repress harshly and for an autocratic polity to be permissive.