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Federal Reserve Bank of St. Louis
Review
Terrorism, Trade, and Welfare
Subhayu Bandyopadhyay
Todd Sandler
Javed Younas
Abstract

For a standard competitive trade model, the authors show that the incidence of terrorism in different nations can affect the pattern of trade. Nations with a greater incidence of terrorism will export goods that are more immune to terrorism-related disruptions, while importing more terrorism-impacted goods. In addition, terrorism can be welfare augmenting for some nations because of terms-of-trade externalities. Finally, the authors present some qualitative conditions that identify when a nation’s trade volume may rise (or fall) in response to a greater incidence of terrorism. Given the differential impact across nations, these trade and welfare results point to potential difficulties in international coordination of counterterrorism policy.


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Subhayu Bandyopadhyay & Todd Sandler & Javed Younas, "Terrorism, Trade, and Welfare" , Federal Reserve Bank of St. Louis, Review, volume 99, issue 3, pages 295-306, 2017.
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DOI: 10.20955/r.2017.295-306
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