Working Paper

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

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;

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Bibliographic Information

Provider: Federal Reserve Bank of St. Louis

Part of Series: Working Papers

Publication Date: 2016-03-01

Number: 2016-2

Pages: 13 pages