Economics serving society

Are Lives a Substitute for Livelihoods? Terrorism, Security, and US Bilateral Imports

Daniel Mirza, Thierry Verdier

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Do border controls (of goods and people) in the context of the war against terrorism have an impact on international trade? Which countries and which sectors are particularly affected? Do the controls modify the daily lives of consumers? This article aims to provide some answers to these questions, in two stages. First, Daniel Mirza and Thierry Verdier construct a simple theoretical model linking trade, security and terrorist acts in a bilateral context. Second, they propose an empirical approach that combines three data bases - of international trade, terrorist incidents and the granting of commercial visas to foreign nationals by the American administration.
Making a distinction between “target” countries (where the victims of terrorism live), “source” countries (where the organization claiming responsibility for the terrorist act is based) and “third” countries (where the terrorist act takes place), the authors investigate a number of points. While more controls (because of fears of terrorist acts) naturally result in a reduction in bilateral trade, a higher level of exchange tends, on the other hand, to reduce the impact of security measures, thus raising the probability of terrorist events. Focussing on the United States, the authors also confirm that terrorist attacks – leading to the introduction of counter-measures at the border – clearly reduce the level of commercial exchange with the country in which the terrorist organization is based. The curve linking these attacks to their commercial impact is strongly non-linear: the negative effects are more than proportional between the United States and the “source” countries increasingly suspected of being the origin of terrorist attacks. Moreover, these effects are at least twice as significant when the acts of terrorist affect a great number of victims; it is also true when the regulated products are highly sensitive to transportation delays or when the trade depends heavily on networks (business and representative). Finally, the reduction in trade visas granted by American customs authorities that ensues from anti-terrorist control measures tends to reduce significantly the range of imported goods available to consumers.
Original title of the article: Are Lives a Substitute for Livelihoods? Terrorism, Security, and US Bilateral Imports
Published in : Journal of Conflict Resolution, December 2013, Vol. 57, Issue 6.
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