TRADE‐OFFS BETWEEN CIVIL LIBERTIES AND NATIONAL SECURITY: A DISCRETE CHOICE EXPERIMENT

We explore differences in perception of national security policies between self‐identified liberals, moderates, and conservatives from a national sample of U.S. adults. Using a discrete choice experiment, we also quantify each group's willingness to trade off select policies in exchange for reduced risk of a 9/11‐style terrorist attack. Relative to other groups, liberals are more likely to view such policies as ineffective and susceptible to government abuse. They also perceive a lower threat of terrorism. All groups are willing to make trade‐offs between civil liberties and risk of a terrorist attack. However, loss of civil liberties affects liberals more than conservatives. (JEL D61, H41, H56)     

Defining governance matters: A factor analytic assessment of governance institutions

This paper produces a new set of governance indices that enable estimation of the marginal economic benefits of particular categories of governance. The indices are constructed using a factor model, estimated on forty perceptions-based governance variables from eleven data sources. In contrast to previous research, a unified statistical framework is used to determine the number of governance indices to create, the conceptual content of each index, and the relative importance each has in accounting for the observable data. The four indices are labeled market infrastructure, downside governance risk, order, and civil liberties. Confidence intervals are calculated for each country, for each index to aid in the comparison of scores. As an application, the indices are used as explanatory variables in cross-country income regressions. Instrumental variables estimates show that market infrastructure and civil liberties both exert statistically and economically significant effects on per capita income, controlling for geography (malaria risk) and international trade.     

Foreign direct investment and civil liberties: A new perspective

The conjecture that democracy discourages foreign direct investment (FDI) has been widely refuted in empirical studies. However, we find support of this view. We distinguish between civil and political liberties and propose that multinational firms tend to invest in countries with low civil but with high political liberties. We show that the negative relationship between civil liberties and FDI is hump-shaped. A threshold level of civil liberties exists, below which repression of civil liberties is associated with more FDI. The results are explained by different economic motives for FDI in different groups of countries.     

Political freedom and the response to economic incentives: labor migration in Africa, 1972-1987

This study examines the thesis that political institutions and the freedoms and civil rights generated by these institutions affect migration decisions. The hypothesis is based on one stated by Adam Smith in 1776, that economic conditions that reflect greater political freedoms and civil liberties harbor higher levels of resource mobility in response to economic incentives. Pooled cross-sectional and time-series analysis is based on data from the World Bank for 32 African countries during 1972-87. Findings support the hypothesis that migration rate is more affected by the expected returns ratio to labor in countries where civil liberties are greater than in nations with fewer civil liberties. The implication, from the inclusion of institutional factors in the model, is that civil liberties have an indirect impact on the rate of labor migration out of agriculture in Africa. The impact is a mix of economic incentives and civil liberties. In the political rights model, the most free countries had the largest migration elasticity. The findings on political rights impacts support findings by Friedman and McMillan that civil liberties are a more important determinant of economic growth than political rights. Further testing for measurement error confirmed that the data were flawed, but not so greatly that the basic findings were overturned. The migration out of African agriculture was found to be sensitive to the effect of price signals, which were conditioned by the degree of political rights and civil liberties. Policy makers are urged to consider both changes in pricing and institutions.     

Unbundling democracy: Political rights and civil liberties

Much recent political economy and political science literature views democracy in terms of political rights. This view, often referred to as electoral democracy, is particularly pronounced in the empirical literature. We reincorporate the role of civil liberties, which are at the core of modern democracy, in two ways. We identify four fundamental sources of potential differences in the evolution of political rights and civil liberties. We present systematic, robust and varied empirical evidence on the direct impact of two of these potential sources of differences using cross-national panel data and accounting for the modernization hypothesis. We obtain two noteworthy empirical results: civil liberties exhibit greater persistence than political rights in affecting subsequent outcomes; and, our main result, civil liberties are complementary to political rights when affecting subsequent outcomes, while the reverse is not the case. Consequently, one must incorporate civil liberties as a determinant of electoral democracy. More generally, both dimensions must be considered to understand the setbacks recently experienced by many democracies, despite their holding of free and fair elections.     

Does democracy affect taxation and government spending? Evidence from developing countries

Focusing on developing countries in three geographical areas (South-East Asia, Latin America and European Union), we explore the relation between political variables and tax revenue, public spending and their structure. We build a new dataset for the 1990–2005 period with fiscal, political and socio-economic variables. Since democracy is a complex and multidimensional concept, we measure it using two variables, the political strength of democratic institutions, and the protection of civil liberties. We perform three sets of estimates: (i) cross-country pooled OLS regressions with region fixed effects, (ii) country fixed effects regressions and (iii) region specific regressions with country fixed effects. While the first model delivers some significant correlations between political variables and tax items, when controlling for country fixed effects we find that tax revenue and tax composition are in general not significantly correlated with the strength of democratic institutions and the protection of civil liberties. The only exceptions are indirect, trade and property taxes. A similar result applies to public spending, with the exception of defense expenditure. Overall, our findings cast some doubt on the exact public policy channels through which political institutions affect economic development.     

Dismantling terrorist networks: Evaluating strategic options using agent-based modeling

Dismantling dark networks remains a critical goal for the peace and security of our society. Terrorist networks are the most prominent instantiation of dark networks, and they are alive and well. Attempts to preemptively disrupt these networks and their activities have met with both success and failure. In this paper, we examine the impacts of four common strategies for dismantling terrorist networks. The four strategies are: leader-focused, grassroots, geographic, and random. Each of these strategies has associated pros and cons, and each has different impacts on the structure and capabilities of a terrorist network. Employing a computational experimentation methodology, we simulate a terrorist network and test the effects of each strategy on the resiliency of that network. In addition, we test scenarios in which the terrorist network has (or does not have) information about an impending attack. Our work takes a structural perspective to the challenge of addressing terrorist networks. Specifically, we show how various strategies impact the structure of the network in terms of its resiliency and capacity to carry out future attacks. This paper also provides a valuable overview of how to use agent-based modeling for the study of complex problems in the terrorism, conflict studies, and security study domains.     

A sensitivity analysis of the impact of democracy on economic growth

Often it is maintained that democracy is a luxury which comes at a price in terms of subsequent slower increases in national living standards. However, various recent cross-section studies on economic growth have found evidence that lack of civil and political liberties is negatively correlated with economic growth. Using various measures of democracy the robustness of previous research is examined. Both direct and indirect effects of lack of civil and political liberties are analysed. Our main conclusion is that the relationship between democracy and economic growth is not robust.     

The effect of migration on terror: Made at home or imported from abroad?

We analyze how a country's immigrant population—defined as the stock of people born abroad—affects the probability of a terrorist attack in the host country. Using data for 20 OECD host countries and 183 countries of origin over the 1980–2010 period our OLS and 2SLS regressions show that the probability that immigrants from a specific country of origin conduct a terrorist attack in their host country increases with a larger number of foreigners from such countries living there. However, this scale effect does not differ from the effect domestic populations have on domestic terror. We find scarce evidence that terror is systematically imported from countries with large Muslim populations or countries where terror networks prevail. Policies that exclude foreigners already living in a country increase rather than reduce the risk that foreign populations turn violent, and so do terrorist attacks against foreigners in their host country. Highly skilled migrants are associated with a significantly lower risk of terror compared with low skilled ones, while there is no significant difference between foreign-born men and women.     

Oil rents, corruption, and state stability: Evidence from panel data regressions

We examine the effects of oil rents on corruption and state stability exploiting the exogenous within-country variation of a new measure of oil rents for a panel of 30 oil-exporting countries during the period 1992–2005. We find that an increase in oil rents significantly increases corruption, significantly deteriorates political rights while at the same time leading to a significant improvement in civil liberties. We argue that these findings can be explained by the political elite having an incentive to extend civil liberties but reduce political rights in the presence of oil windfalls to evade redistribution and conflict. We support our argument documenting that there is a significant effect of oil rents on corruption in countries with a high share of state participation in oil production while no such link exists in countries where state participation in oil production is low.     

Information, civil liberties, and the political economy of witch-hunts

Drawing from an extensive literature on the European witch-hunt,McCarthyism, and the Chinese Cultural Revolution, this articlestudies how differences in the level of civil liberties protectionand the extent to which the leader has better information aboutthe level of the alleged menace than the populace, togetherwith other variables, jointly determine the incidence of witch-hunts.I develop a model showing that at any level of civil libertiesprotection, the incidence of illegitimate witch-hunts is higherwhen the leader enjoys an informational advantage than whenhe does not. This difference, however, is decreasing in thelevel of civil liberties protection. However, no amount of civilliberties protection is sufficient to prevent the occurrenceof illegitimate witch-hunts, so long as the citizen has a concernfor the menace, and the leader enjoys an informational advantageand finds the benefit from conducting a witch-hunt to be largerthan his reputational loss.     

Applying economic methodology to the war on terrorism

The application of economic methodology to the problem of terrorism is discussed. Theoretical and empirical results are discussed with particular focus on the September 11 attack and the retaliatory response by the United States. Economists have relied on the rational agent model to derive testable hypotheses regarding the behavior of terrorists. The rational agent model postulates that terrorists respond to incentives, including media publicity, and the model predicts that when the net marginal benefit from one type of terrorist activity is diminished, terrorists will substitute into alternative modes of terrorism. Empirical results demonstrating that such substitutions indeed occur are discussed. Therefore, policy designed to reduce a particular form of terrorism, such as increased airport security to prevent airplane hijackings, may simply result in terrorists choosing alternative modes of terrorism. Empirical evidence demonstrating that terrorism is cyclical in nature is also discussed. Evidence on substitution and cycles suggests that following temporary reduction in terrorist activity after retaliation against terrorists and their infrastructure, terrorists are able to successfully regroup and attack using alternative means. Therefore, the current US focus on fighting terrorism on all fronts and over the long haul is the correct approach.     

Whether to attack a terrorist's resource stock today or tomorrow

A terrorist defends an asset which grows from the first to the second period and is attacked. With large asset growth, the terrorist's first period outcome is low caused by a large attack. With no expenditure constraint, the terrorist's total outcome is positive. With equal attack and defense inefficiencies, when the terrorist as defender requires his first period outcome to be positive, the attacker eliminates the asset in the first period when asset growth multiplied with the square roots of the terrorist's and attacker's discount parameters exceed . This gives maximum conflict in the first period. Growth and the two discount parameters are strategic complements. The range for the attack inefficiency divided by defense inefficiency, which causes negative first period outcome for the terrorist, increases with asset growth. The attacker refrains from asset elimination in the first period due to strength (weakness) if the ratio is below (above) the range.     

GLOBALIZATION AND SOCIAL SPENDING

Abstract. We provide evidence indicating that countries with well developed social security systems do not necessarily face a trade‐off between social spending and competitiveness. On average, countries that spend a lot on social needs score well in the competitiveness league. We investigate the importance of a reverse causality from competitiveness to social spending, and find that this is weak. We also present some possible explanations for our empirical finding. Finally, we interpret our findings in the framework of a theoretical model in which risk affects the size of the social sector and social spending affects the production function of the private sector.     

Geoeconomic Assumptions,Insecurity, and ‘Free’ Trade in Central America

The Central American Free Trade Agreement (CAFTA) exemplifies interconnections and contradictions between geopolitical and geoeconomic agendas, including security, democracy, and resource marketing. Central American sovereignty is selectively weakened as states are increasingly dependent on the US and must synchronise governance with the expectations of their most important trade partner or risk becoming defendants in international tribunals. Salvadoran and Costa Rican governments have been accused of upholding environmental regulations that impede the profit-earning of multinational corporations, while the Guatemalan state was charged with violating domestic labour laws. Nevertheless, criminal behaviour and impunity are widespread across the region and seldom provoke US action. Five years after CAFTA's implementation, there is evidence of the erosion of democracy, repression of civil society, and uneven distribution of trade costs and benefits. These results have led some analysts to conclude CAFTA must be renegotiated, while others recommend human and labour rights protocols accompany free trade agreements.     

Modeling longevity risk transfers as Nash bargaining problems: Methodology and insights

The problem of longevity risk has recently received considerable attention. In this paper, we apply economic modeling methods to longevity risk securitization, which is now regarded by pension and insurance industries as a solution to the problem. Specifically, we model the trade of a longevity security as a two-player bargaining game, and use Nash's bargaining solution to determine the outcome of it. Our work not only offers an alternative method for pricing longevity securities, but also reveals several properties about the market for longevity securities. First, a trade would occur if the longevity security is an effective hedging instrument, and the trade would benefit all agents involved. Second, a trade of longevity risk can reduce pension plans' bankruptcy risk, safeguarding the financial security of pension plan members. Finally, compared to the competitive equilibrium, Nash's bargaining solution yields higher trading prices. Therefore, as the market becomes more competitive, pension plans may hedge longevity risk at a lower cost.     

NUCLEAR TERRORISM: REACTOR SABOTAGE AND WEAPONS PROLIFERATION RISKS

Nuclear power plants and research reactors are vulnerable to acts of terrorism that could render safety systems inoperable and result in catastrophic releases of radioactivity. In addition, expanding civil commerce in weapon-usable forms of plutonium and uranium and deploying tactical nuclear weapons in areas where terrorists are active increase the risk of terrorists' building or stealing nuclear weapons or, even more likely, carrying out a credible hoax.
The United States and other advanced industrialized nations should be concerned about nuclear terrorism, the threat of which now is perceived as low. However, if terrorist groups become more determined, violent, and technologically advanced, as some experts anticipate, then the possibility of nuclear terrorism will likely increase with little warning. Nuclear terrorism, regardless of where it occurs, could have far-reaching consequences for economic stability and world peace. Western Europe is a region of continuing concern due to its high level of "nuclearization" – that is, civil and military nuclear development – and the presence of sophisticated terrorist organizations operating across national boundaries.
This paper reviews potential dangers and available remedies based on the report of the International Task Force on Prevention of Nuclear Terrorism, on policy and technical studies prepared for the Task Force, and on follow-up research conducted by the Nuclear Control Institute, the Task Force's sponsoring organization.     

Trade and civil conflict: Revisiting the cross‐country evidence

We revisit and expand the evidence on the impact of trade shocks on intra‐state conflict by using a large sample of developing countries in the 1960–2010 period. The results suggest that increases in the price of a country's exported commodities raise the country's risk of civil conflict and its duration. The effect on conflict risk is mainly driven by the price of point‐source commodities, in line with the rapacity effect theory of conflict. Intense trading with contiguous countries is associated with lower duration of conflict, consistent with the idea that such trade reduces the incentive of these countries to fuel conflict in their neighbor. Trading with neighbors is also associated with a lower risk of conflict when such trade occurs under trade agreements. On the other hand, we find no support for the opportunity cost theory via exported and imported commodities, nor via the economic cycle in export markets. We also identify a number of conditions under which the changes in the value of exported commodities cease to matter for conflict probability.     

中国打击恐怖活动犯罪的刑事立法完善

全国人大常委会于2011年10月通过的《关于加强反恐怖工作有关问题的决定》对恐怖活动的定义进行了明确,并对恐怖活动组织及恐怖活动人员的认定机关及相关工作程序等问题进行了明确。但是,该决定对恐怖活动的定义过于宽泛,不利于集中打击对中国国家安全构成重大威胁的基于民族分裂主义和宗教极端主义产生的恐怖活动犯罪。而且,中国刑法没有关于恐怖活动犯罪刑罚的特殊规定,不利于实现惩处此类犯罪罪刑相适应原则的实现。为此,要通过立法完善刑法相关规定：第一,建议修改刑事立法,对恐怖活动犯罪作狭义规定,并将其界定为危害国家安全犯罪下的一类犯罪。第二,全面完善恐怖活动犯罪刑罚规定,对恐怖活动犯罪全面适用剥夺政治权利、财产刑和比客观表现相同的普通刑事犯罪更重的刑罚,并考虑设立不得减刑、假释的无期徒刑（终身监禁）刑罚制度。     

Optimal monetary policy: distribution efficiency versus production efficiency

This paper investigates the trade‐off between distribution effect and production effect of monetary policy when there exist unobservable idiosyncratic liquidity shocks. In the absence of risk‐sharing arrangements such as a credit market, monetary policy serves to provide ex post insurance to smooth consumption. Specifically, issuing interest‐bearing bonds restores credit transactions on money through bond‐money exchanges. Such a policy has a positive distribution effect, but the resulting inflation hampers production efficiency. It is demonstrated that the trade‐off between distribution efficiency gain and production efficiency loss would result in net welfare enhancement if consumers are relative‐risk‐averse enough.