Terrorism, Trade and Welfare: Some Paradoxes and a Policy Conundrum

13 Pages Posted: 8 Mar 2016 Last revised: 3 Jan 2019

See all articles by Subhayu Bandyopadhyay

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division; IZA Institute of Labor Economics; West Virginia University

Todd M. Sandler

University of Texas at Dallas - School of Economic, Political and Policy Sciences, Department of Economics & Finance

Javed Younas

American University of Sharjah - Economics Department

Date Written: 2016-03-01

Abstract

We present a standard trade model and show that terrorism can be trade inducing, starting from autarky. In addition, terrorism can be shown to be welfare augmenting for a group of nations. Finally, we present some qualitative conditions that identify when a nation’s trade volume may rise (or fall) in response to a greater incidence of terrorism. Our trade and welfare results point to potential difficulties in international coordination of counterterrorism policy because of terrorism’s differential impact across nations.

Keywords: Terrorism, Trade, Welfare

JEL Classification: F11, F52, H56

Suggested Citation

Bandyopadhyay, Subhayu and Sandler, Todd M. and Younas, Javed, Terrorism, Trade and Welfare: Some Paradoxes and a Policy Conundrum (2016-03-01). FRB St. Louis Working Paper No. 2016-2. Available at SSRN: https://ssrn.com/abstract=2744529 or http://dx.doi.org/10.20955/wp.2016.002

Subhayu Bandyopadhyay (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
PO Box 442
St. Louis, MO 63011
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

West Virginia University ( email )

Morgantown, WV 26506-6025
United States
304-293-7879 (Phone)
304-293-7061 (Fax)

Todd M. Sandler

University of Texas at Dallas - School of Economic, Political and Policy Sciences, Department of Economics & Finance ( email )

Richardson, TX 75083
United States

Javed Younas

American University of Sharjah - Economics Department ( email )

P.O. Box 26666
Sharjah
United Arab Emirates

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