Economics of National Security

Paper Session

Saturday, Jan. 7, 2017 7:30 PM – 9:30 PM

Hyatt Regency Chicago, Randolph 1
Hosted By: Economics of National Security Association
  • Chair: Martin Feldstein, Harvard University

What Explains the Flow of Foreign Fighters to ISIS?

Efraim Benmelech
Northwestern University
Esteban Klor
Hebrew University of Jerusalem


This paper provides the first systematic analysis of the link between economic and social conditions with the global phenomenon of ISIS foreign fighters. It combines a detailed data set on the number of ISIS foreign fighters emerging from countries around the world with data on countries'social, political and economic indicators. These indicators capture countries' political and social fragmentation, economic development, inequality and unemployment. We find that the number of ISIS fighters is positively correlated with a country's level of homogeneity, GDP per capita, and the size of its Muslim population. The results are robust for different empirical specifications, econometric models, and samples of countries. Interestingly, the political characteristics of the host countries are not correlated with the number of ISIS fighters. Our results point thus to a new type of countries providing recruits into terror organizations. These recruits are affected by their difficulty assimilating to Western societies and by the targeted recruiting of Muslims in the West used by ISIS.

International Isolation and Regional Inequality: Evidence From Sanctions on North Korea

Yong Suk Lee
Stanford University


This paper examines how domestic economic activity and regional inequality evolve when a country becomes<br />
increasingly isolated from international trade and finance because of sanctions. How might sanctions affect regional economic inequality? Existing research provide insights to this question. As a country becomes increasingly isolated, the government, often an autocracy, could reallocate resources to regions favored by the regime, e.g., the capital city. The country could develop its manufacturing regions to substitute for imports. On the other hand, the country could rely more on its natural resources if limited access to capital and intermediate goods inhibits production capacity. Lastly, trade would likely move to regions within the country where trade frictions become relatively lower. I empirically test these hypotheses on North Korea. The fluctuation of sanctions on North Korea provides a unique setting to examine these predictions. Sanctions were initially relaxed during the 1990s but drastically increased since the mid 2000’s as North Korea pursued nuclear weapons. Furthermore, labor is not mobile in North Korea, which makes it an ideal setting to infer economic inequality from regional inequality. I use satellite night lights data to examine how sanctions impact regional economic inequality and use product level trade data to examine how sanctions impact production based on factor intensity. Though the economic sanctions were likely exogenous to domestic inequality within North Korea, I also use the majority party share of US House Foreign Affairs Committee as an instrumental variable. The Foreign Affairs Committee oversees legislations relating to sanctions and the majority party share strongly predicts the level of sanctions.

The Value of Statistical Life: Evidence From Military Retention Incentives and Occupation-Specific Mortality (joint with Michael Greenstone, Stephen Ryan, and Michael Yankovich)

Kyle Greenberg
U.S. Military Academy


We propose a novel approach to estimating the Value of Statistical Life (VSL) using a discrete choice random utility setting based on detailed information available to 500,000 first-time U.S. Army soldiers who faced a reenlistment decision between 2002 and 2010. Exploiting substantial variation in both occupation-specific retention bonuses and occupation-specific mortality risk within and between military occupations over time, we derive point estimates of the VSL that range from $400,000 and $600,000 and are tightly estimated. This information rich environment allows us to derive individuals' marginal willingness to pay functions - the set of bonuses and mortality risks that give the same utility level. Furthermore, the institutional setting, where bonus offers change frequently at unannounced intervals and where fatality risks are well known but vary with the intensity of conflict in Iraq and Afghanistan, mitigates common concerns within the VSL literature: that unobserved job features are correlated with fatality risk and that fatality risks are unknown.

Bombing the Way to State-Building? Lessons From the Vietnam War

Melissa Dell
Harvard University
Pablo Querubin
New York University


The United States has employed a variety of strategies to defeat insurgents and strengthen states over the past half-century, ranging from the top-down deployment of military force to bottom-up initiatives to win hearts and minds by promoting civic engagement and economic development. This study exploits novel opportunities for identification provided by the Vietnam War to examine these diverse strategies. It identifies the impacts of bombing civilian population centers in South Vietnam by exploiting discontinuities in an algorithm used to target air strikes. Military planners used a Bayesian algorithm to assign hamlets a continuous security score, but due to computational limitations the score had to be<br />
rounded to the nearest whole number before it could be read from the mainframe computer. Hamlets just barely below the rounding threshold are significantly more likely than those just above it to be bombed in the following months but are identical beforehand. IV estimates exploiting the security score rounding thresholds to instrument air strikes document that the bombing of civilian population centers led more Vietnamese to join the communist insurgency, worsened security conditions, and lowered public goods provision and non-communist civic engagement. The study also exploits a spatial discontinuity across neighboring military corps regions, one commanded for idiosyncratic historical reasons by the U.S. Marines and the other commanded by the U.S. Army. The Marines emphasized a relatively bottom-up approach that embedded soldiers in communities and promoted hearts and minds initiatives, whereas Army strategy emphasized the use of military search and destroy raids to eliminate insurgents. Relative to the Army's search and destroy strategy, the Marines' hearts and minds approach plausibly increased access to health care and primary school completion rates, improved security, and improved attitudes towards the U.S. and all levels of South Vietnamese government.
JEL Classifications
  • F5 - International Relations, National Security, and International Political Economy
  • Z0 - General