Security and Government Credibility

The security necessary for investment and income growth is difficult to establish in areas where the government is weak. A prescriptive political objective for unstable countries is to strengthen the government’s ability to make credible commitments to establish security. We model the production of security in regions characterized by relatively weak central governments as a pseudo-public goods provision game in which both national and local authorities make contributions to jointly determine the level of public security. Strategic underinvestment in security by the government occurs whenever the government is able to credibly pre-commit to a minimum level of public safety. When the central government is unable to pre-commit, aggregate security (and economic output) is higher than under pre-commitment, and it increases as the locals become more efficient at security provision. We show free riding by central powers on local authorities potentially describes the security structure of inner-city neighborhoods and prisons in the United States, despite a strong central government with the capacity to make credible commitments.