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The Economics of Roadside Bombs

  • Matthew A. Hanson


    (Department of Economics, College of William and Mary)

The U.S. military has been criticized for its failure to stop the Iraqi insurgency’s use of improvised explosive devices (IEDs), which have caused most of the Coalition casualties. We use an instrumental variables approach to estimate the insurgent responses to U.S. military countermeasures. We find that the number of IED attacks (including unobserved attacks) goes up when attacks are made more costly to conduct, suggesting that IED attacks are inferior and may even be a Giffen good. A major benefit of IED countermeasures therefore comes in reducing non-IED attacks. Evaluations of the U.S. military’s $13 billion counter-IED effort have thus significantly understated its success.

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Paper provided by Department of Economics, College of William and Mary in its series Working Papers with number 68.

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Length: 22 pages
Date of creation: 11 Dec 2007
Date of revision:
Handle: RePEc:cwm:wpaper:68
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  1. Jensen, Robert & Miller, Nolan, 2007. "Giffen Behavior: Theory and Evidence," Working Paper Series rwp07-030, Harvard University, John F. Kennedy School of Government.
  2. Sandler, Todd & Enders, Walter, 2004. "An economic perspective on transnational terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 301-316, June.
  3. Jaeger, David A. & Paserman, M. Daniele, 2006. "Israel, the Palestinian Factions, and the Cycle of Violence," IZA Discussion Papers 1923, Institute for the Study of Labor (IZA).
  4. Efraim Benmelech & Claude Berrebi, 2007. "Attack Assignments in Terror Organizations and The Productivity of Suicide Bombers," NBER Working Papers 12910, National Bureau of Economic Research, Inc.
  5. Battalio, Raymond C & Kagel, John H & Kogut, Carl A, 1991. "Experimental Confirmation of the Existence of a Giffen Good," American Economic Review, American Economic Association, vol. 81(4), pages 961-70, September.
  6. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-36, July.
  7. Robert T. Jensen & Nolan H. Miller, 2007. "Giffen Behavior: Theory and Evidence," NBER Working Papers 13243, National Bureau of Economic Research, Inc.
  8. Hoy, Michael & Robson, Arthur J., 1981. "Insurance as a Giffen good," Economics Letters, Elsevier, vol. 8(1), pages 47-51.
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