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Economics of National Security

Paper Session

Friday, Jan. 4, 2019 2:30 PM - 4:30 PM

Atlanta Marriott Marquis, International 3
Hosted By: Economics of National Security Association
  • Chair: Eli Berman, University of California-San Diego

Terrorism Financing, Recruitment and Attacks: Evidence from a Natural Experiment in Pakistan

Nicola Limodio
Bocconi University


I investigate the relation between terrorism financing and attacks through a panel of 1,545 Pakistani cities and exogenous variation in a Sharia-compliant funding source. Cities exposed to higher terrorism financing experience more attacks, with organizations reacting to temporary financial inflows. Two methodological innovations further refine this finding. First, the effect of financing on attacks increases in terrorist recruitment, measured using dark-web data on Jihadist fora and machine-learning. Second, a novel city-organization variation allows: a) dissecting the demand and supply of terrorist attacks, with supply exclusively explaining these results; b) estimating the elasticity of terrorist attacks to financing (0.08).

The Reach of Radio: Ending Civil Conflict through Rebel Demobilization

Alex Armand
University of Navarra
Paul Atwell
University of Michigan
Joseph Gomes
University of Navarra


We study the role of FM radio messaging in mitigating and ending violent conflict. We collected original data on defection messaging by local and international radio stations in the four countries (DR Congo, Central African Republic, South Sudan and Uganda) affected by the Lord’s Resistance Army (LRA) insurgency. We exploit random topography-driven variation in radio coverage along with panel variation at the grid cell level to capture the causal effect of defection messaging on violence. We find that a higher intensity of defection messaging leads to a decrease in both fatalities and violence against civilians driven primarily through an increase in defections. Through this same channel the LRA resorts to increased
looting for survival. We also show conflict enhancing commodity price shocks lead to higher levels of conflict and reduce the pacifying effects of defection messaging.

Deterrence with Imperfect Attribution

Sandeep Baliga
Northwestern University
Ethan Bueno de Mesquita
University of Chicago
Alexander Wolitzky
Massachusetts Institute of Technology


Motivated by recent developments in cyberwarfare, we study deterrence in a world where attacks cannot be perfectly attributed to attackers. In the model, each of n attackers may attack the defender. The defender observes an imperfect signal that probabilistically attributes the attack. The defender may retaliate against one or more attackers, and wants to retaliate against the guilty attacker only. We uncover an endogenous strategic complementarity among the attackers: if one attacker becomes more aggressive, that attacker becomes more "suspect" and the other attackers become less suspect, which leads the other attackers to become more aggressive as well. Improving the defender's ability to detect attacks or identify the source of attacks can hinder deterrence and lead to more attacks, but simultaneously improving both detection and identification always reduces attacks. Deterrence is improved if the defender can commit to a retaliatory strategy in advance, but the defender should not always commit to retaliate more after every signal.

War! What is it Good For? The Effect of Post-9/11 Combat Service on Economic Transitions of Veterans

Joseph J. Sabia
San Diego State University
William L. Skimmyhorn
United States Military Academy


Following major combat operations in Iraq and Afghanistan, the U.S. Army has undergone its most ubstantial drawdown since the end of the Cold War. Using new Army administrative panel data, this study is the first to estimate the impact of post-9/11 combat service on separating veterans’ economic wellbeing. We exploit a natural experiment in overseas deployment assignments and find that combat deployments substantially increase separating soldiers’ reliance on Veterans’ Disability Compensation (VDC) benefits for Post-Traumatic Stress Disorder (PTSD) and Traumatic Brain Injury (TBI), as well as benefits under the Unemployment Compensation for Ex-Servicemember (UCX) program. In addition, we find that combat deployments of over 18 months are associated with a 20 to 35 percent reduction in educational attainment during enlistment and a 4 to 10 percent decline in the probability of obtaining a bachelor’s degree following separation. These adverse human capital effects are exacerbated by unit-level combat exposure.
JEL Classifications
  • H5 - National Government Expenditures and Related Policies
  • F5 - International Relations, National Security, and International Political Economy