Terrorism, Trade and Welfare: Some Paradoxes and a Policy Conundrum
13 Pages Posted: 8 Mar 2016 Last revised: 3 Jan 2019
Date Written: 2016-03-01
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: Suggested Citation