Aid in Times of Terror

Abstract:     
In a scenario where terrorist organizations, based in an LDC, target a rich nation, we examine a joint, multi-pronged and dynamic counter-terror strategy and the role that developmental aid plays in its success. We show that aid-tying leads to a fruitful virtuous cycle whereby joint counter-terror operations help in the observability of aid delivery, and aid in its turn makes greater counter-terror possible. Further, the counter-terror operations must be the largest possible at the very beginning. We argue that it is not necessarily the case that a more hawkish donor is less pro-development, or that a more altruistic donor is softer on terror. Moreover, we identify channels through which international diplomacy aimed at reducing regional hostility can help in the war against terror.

Keywords: Developmental Aid, Terror, Aid-tying, Joint Counter-terror Operations, Diplomacy

JEL Classification: D04, F50, O12

working papers series