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Economics of National Security Association

Paper Session

Saturday, Jan. 3, 2026 8:00 AM - 10:00 AM (EST)

Philadelphia Marriott Downtown
Hosted By: Economics of National Security Association
  • Chair: Eli Berman, University of California-San Diego

Violent Competition in Illegal Sectors

Davide Zufacchi
,
University College London
Isaia Sales
,
Universita Sour Orsola Benincasa

Abstract

This paper examines how market concentration influences violence in illegal sectors. Leveraging
new intelligence data from Naples’ retail drug market, we showthat more fragmented
areas are more violent. We then develop a quantitative model of an oligopolistic market
in which gangs strategically decide whether to engage in conflict, balancing expected additional
profits from gaining market share against the costs of increased violence and police
presence. We estimate the model using original data on drug seizures, inter-gang conflict,
and police attention. We find an inverse-U shape relationship between market concentration
and violence, suggesting that policies aimed at fragmenting criminal organizations may
inadvertently escalate violence in moderately concentrated markets. These findings highlight
the need for tailored law enforcement strategies based on local market dynamics.

Hobbesian Third-Party Intervention in Sequential Wars of Attrition with Incomplete Information

Martin Castillo-Quintana
,
University of Chicago

Abstract

Vast literature in political science and political economy argues or assumes that the state’s primary
role is to provide security. I propose a dynamic model that examines the strategic interactions between
state and non-state groups violently competing over economic rents, under uncertainty
about each group’s strength and with the continual emergence of new groups. In the model,
non-state groups engage in sequential wars of attrition with replacement under asymmetric information.
This violent competition generates a negative externality for citizens whom the state
seeks to protect; in the model, the state can target individual groups to reduce their capacity for
violence. The analysis yields new theoretical insights while adhering to old assumptions about
state behavior by incorporating the strategic tensions that arise under limited capacity. First,
directly reducing the capacity for violence in both groups may inadvertently escalate violence
through strategic reactions; second, policies that minimize short-term violence may maximize future
violence by shaping the reputation-building process; and third, divergent long-run dynamics
in the frequency and intensity of violence emerge, the model allows us to distinguish between
divergence driven by preferences and that driven by constraints.

Multinational Supply Chain Decoupling Strategies and Constraints: Evidence from U.S. Importers and the Return of Geopolitics

Tarek Ghani
,
Washington University in St. Louis
Witold Henisz
,
University of Pennsylvania
Anne Jamison
,
Copenhagen Business School
Harald Puhr
,
Innsbruck

Abstract

There is intensive debate about the changing nature of globalization, including whether it is happening at all, and if so, what will replace it. Less attention has been focused on heterogeneity across countries, industries, and firms in their reactions to a potential new global order. Despite speculation about the re-emergence of geopolitical blocs, there is scarce empirical evidence of economic decoupling in response to geopolitical alignment. We exploit firm-level microdata from U.S. importers and country-level opinion polls from 2007-2023 to demonstrate a pattern of increased purchases when third countries realign away from China. Our results are robust to fixed effects at the firm-country and firm-year level and a battery of country-year controls. Effects are stronger for nonaligned countries than with U.S. security allies. Firms with more imports from allied countries respond more to realignment than firms with more imports from China. Effects are heightened for more knowledge-intensive goods and attenuated for critical goods with few substitutes. Our findings extend traditional insights from resource dependency theory to the modern phenomenon of geopolitical rivalry and have implications for national security policies.

Timing is Everything: Estimating Strategic Responses with Observational Data

Danny Klinenberg
,
University of California Institute on Conflict and Cooperation
Eli Berman
,
University of California-San Diego
Esteban Klor
,
Hebrew University-Jerusalem

Abstract

Researchers studying strategic behavior have estimated response curves
using observational data at pre-specified time intervals, such as days, applying Vector Autoregressions (VAR). This assumes a constant response
time throughout the sample. We analytically show that VAR analyses do
not recover true reaction curves if either side’s response time is stochasic:
doing so can cause attenuation bias, amplification bias, or sign reversal. We
recommend instead organizing data at the action level. Since observational
data is usually collected and recorded at some time-level, we investigate
potential biases from recoding it to the action level. We conclude with Monte
Carlo simulations highlighting the challenges of studying strategic behavior
with observational data recorded at pre-specified time intervals.
JEL Classifications
  • H5 - National Government Expenditures and Related Policies
  • F5 - International Relations, National Security, and International Political Economy