Foreign aid as counterterrorism policy
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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- Jean-Paul Azam & Véronique Thelen, 2008.
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- 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.
- Khusrav Gaibulloev & Todd Sandler, 2008. "Growth Consequences of Terrorism in Western Europe," Kyklos, Wiley Blackwell, vol. 61(3), pages 411-424, 08.
- Quan Li, 2005. "Does Democracy Promote or Reduce Transnational Terrorist Incidents?," Journal of Conflict Resolution, Peace Science Society (International), vol. 49(2), pages 278-297, April.
- 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.
- Sandler, Todd & Lapan, Harvey E., 1988. "The Calculus of Dissent: An Analysis of Terrorists' Choice of Targets," Staff General Research Papers Archive 10818, Iowa State University, Department of Economics. Full references (including those not matched with items on IDEAS)
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