education poverty and terrorism is there a causal connection the paper investigates whether there is a connection between poverty or low education and terrorism we review evidence on hate crimes which are closely related to terrorism the occurrence of hate crimes is largely independent of economic conditions we analyze data on support for attacks against israeli targets from public opinion polls conducted in the west bank and gaza strip support for violent attacks does not decrease among those with higher education and higher living standards the core contribution of the paper is a statistical analysis of the determinants of participation in hezbollah militant activities having a living standard above the poverty line or a secondary or higher education is positively associated with participation in hezbollah we also find that israeli jewish settlers who attacked palestinians in the west bank in the early 1980s were overwhelmingly from high paying occupations although our results are tentative and exploratory they suggest that neither poverty nor education has a direct causal impact on terrorism

the nonlinear relationship between terrorism and poverty in spite of the common wisdom that poverty breeds terrorism in their meta study gassebner and luechinger 2011 report that the two robust explanatory variables for terrorism are population and various measures of democratic freedom but not per capita gdp their results from 13 4 million different regressions estimated using various combinations of the 65 variables contained in 43 different studies indicate no significant causal effects between terrorism and per capita gdp we add to the large and growing literature on the relationship between terrorism and poverty in two ways first unlike previous studies we use a dataset that decomposes the number of terrorist acts into domestic and transnational incidents we show that poverty has a very distinct effect on each type of terrorism second we use split sample and smooth transition regression star estimation techniques to allow for a nonlinear relationship between terrorism and poverty when we account for the nonlinearities in the data and distinguish between the two types of terrorist events we find that poverty has as a very strong influence on domestic terrorism and a small but significant effect on transnational terrorism

transition to fully funded pension schemes a non orthodox criticism summary the paper examines the dominant views on the adoption of mandatory fully funded pension schemes ff as a partial or complete substitute for the unfunded payg three obstacles to the ff reform are envisaged to begin with the reform may fail to boost workers marginal propensity to save since workers may contract their voluntary saving to compensate the larger mandatory saving to ff schemes secondly if payg s payroll contributions are reduced and diverted to a ff scheme the larger private saving supply will be balanced by a lower government saving if the government is committed to honour the current pension payments thirdly keynes saving paradox reinforced by the capital theory critique initiated by sraffa suggests that the effect of the rise in the marginal propensity to save is not an increase in capital accumulation but rather a fall of income and employment

how should we incentivize private landowners to produce more biodiversity globally much biodiversity is found on private land acting to conserve such biodiversity thus requires the design of policies which influence the decision making of farmers and foresters in this paper we outline the economic characteristics of this problem before reviewing a number of policy options such as conservation auctions and conservation easements we then discuss a number of policy design problems such as the need for spatial coordination and the choice between paying for outcomes rather than actions before summarizing what the evidence and theory developed to date tell us about those aspects of biodiversity policy design which need careful attention from policy makers and environmental regulators

witchcraft weather and economic growth in renaissance europe between the thirteenth and nineteenth centuries as many as one million individuals in europe were executed for the crime of witchcraft the majority of the trials and executions took place during the sixteenth and seventeenth centuries during this period the speed and volume of executions were astonishing in one german town as many as 400 people were killed in a single day midelfort 1972 the trials were ubiquitous conducted by both ecclesiastical and secular courts by both catholics and protestants the victims were primarily women primarily poor and disproportionately widows the persecutions took place throughout europe starting and ending earlier in southwest europe than in the northern and eastern areas and spread even across the atlantic ocean to salem massachusetts although witchcraft trials in europe and america largely ended by the late eighteenth century witchcraft accusations and killings still take place in many countries today particularly in the developing world for example witchcraft is often blamed for aids deaths in sub saharan africa ashforth 2001 and miguel 2003 shows that negative economic shocks are associated with increases in witch killing in modern tanzania belief in the witch and fear of her is enduring while much work has been done on the motivations behind the european trials the large scale causes remain unknown the existing work has primarily been concerned with the factors that played into trials on a small scale why a certain individual was targeted or why a certain type of individual was targeted in a given area this work has indicated that there was a diverse set of issues that played into trials on an individual level more broadly however there are few causal explanations for why witchcraft trials happened at all and on such a large scale in so many

optimal design of pro conservation incentives abstract payments for environmental services pes schemes have become an increasingly accepted and popular mode for governmental and non governmental agencies to use in addressing local and regional declines in ecosystem services in pes schemes payments can either be tied to indicators of actions for service provision or to indicators of the generated service itself performance payments are synonymous for this second group i e payments are completely contingent on the procurement of an environmental good or service such a focus raises several practical issues during implementation we review and translate key aspects of the economic theory of incentives into the context of performance payment schemes with special attention paid to two practical issues risks outside the individual s control and distortion in the measurement of environmental services four different incentive payment approaches are presented and the effects of risk and distortion on optimal incentives are discussed the investigation of each payment approach is accompanied by a discussion of examples from the field

do poverty and poor health and nutrition increase the risk of armed conflict onset abstract we analyze the effects of improving the economic food security and health status on the risk of armed cotntectflict onset focusing on the factors related to the millennium development goals we employ the discrete time hazard model that allows us to examine the time varying effects of socioeconomic factors controlling for the reverse effect of conflict our results show that income poverty and poor health and nutritional status are more significantly associated with armed conflict onset than gdp per capita annual gdp growth and the ratio of primary commodity exports over gdp in particular poor health and nutritional status seems to play a key role in inducing armed conflicts in poor countries these results indicate that when a majority of the poor and the malnourished resides in rural areas and depends on agriculture directly or indirectly investments in public goods for agriculture and rural areas can be effective tools to achieve the multiple goals of reduced poverty food security and armed conflict including riots in early 2008 triggered by high food prices food policy can be an effective element of efforts to maintain stability

performance of input and output based payments for the conservation of mobile species abstract a conceptual model is presented for the comparison of input based payments where conservation measures are rewarded and output based payments where conservation outcomes are rewarded in a spatially structured landscape the landscape consists of a grid of land parcels each managed by a land user the objective of the conservation agency is the survival of an endangered mobile species in the landscape the comparison of the two payment schemes is made with regard to cost effectiveness maximizing species survival for given total conservation costs and budget effectiveness maximizing species survival for given conservation budget the model is a grid based dynamic stochastic ecological economic simulation model in the model analysis it is found that within the considered model parameter ranges the output based payment outperforms the input based payment except for the cases of risk averse land users and spatial spill overs the comparative advantage of the output based payment increases with increasing viability and decreasing dispersal range of the species and with decreasing spatial variation of the conservation costs in the light of these results output based payments appear as a promising policy option even for mobile species where the local outcome presence of the species in the land parcel of a local conservation measure is uncertain

incentive based policy design for pollution control and biodiversity conservation a review this paper provides a succinct review of the main developments in the literature on incentive based policy mechanisms in the contexts of pollution control and biodiversity conservation dating from the early beginnings of the science in the 1960s a focal point in the review is on the design features of these policy mechanisms key developments in policy design were originally established in controlling externalities arising from pollution and have since been extended to policy design tailored towards biodiversity conservation special emphasis is given to the spatial characteristics of the environmental problems underlying both pollution control and biodiversity conservation the paper concludes by drawing some lessons and setting out elements of a future research agenda in both policy domains

the cost of fear the welfare effect of the risk of violence in northern uganda although the effects of insecurity are believed to be important these have never been directly measured previous estimates of the costs of conflict have only captured the joint effect of violence and insecurity the distinction is important for understanding the origins of the costs and for policy design spatially disaggregated measures of insecurity are created based on the spatial temporal variation in the placement of violence these are used to generate the first estimates of the relative causal contributions of the risk and experience of violence the article also provides the first micro data based counterpart to the cross country literature on the costs of conflict

impact of pension privatization on foreign direct investment summary we explore the causal effect of market oriented pension reform on net foreign direct investment fdi inflows in latin america and among the transitional economies of eastern europe and central asia both of which have experienced waves of pension privatization and fdi over the last two decades with our balanced panel of 42 countries over the 1991 2006 period we implement fixed effects models controlling for the decision to enact full or partial privatization of the public pension system and several other covariates whose choice is informed by the rich empirical literature on fdi our econometric results indicate that pension privatization triggers a significant increase in net fdi inflows and that the effect does not wane over time we estimate that full privatization increases fdi as a percentage of gdp by about 57 ceteris paribus

does competition in privatized social services work the chilean experience summary this paper examines the premises under which the privatization of chilean social services of 1981 was carried out reformers expected that i competition between providers would ensure a more efficient supply of services and ii shifting decisions to households would guarantee a better satisfaction of household needs although some of the benefits of competition are lost through rent dissipation especially in the providers search for the more profitable customers we conclude that the reform has benefited society by providing competition to public providers and reducing the risk of political capture the major lesson however is that the full benefits from privatization cum competition are slow to arrive and require able regulators moreover the benefits of privatization may depend to a large extent on implementation fine tuning

the optimal initial allocation of pollution permits a relative performance approach the initial allocation of pollution permits is an important aspect of emissions trading schemes we generalize the analysis of bohringer and lange 2005 eur econ rev 49 8 2041 2055 to initial allocation mechanisms that are based on inter firm relative performance comparisons including grandfathering and auctions as well as novel mechanisms we show that using firms historical output for allocating permits is never optimal in a dynamic permit market setting while using firms historical emissions is optimal only in closed trading systems and only for a narrow class of allocation mechanisms instead it is possible to achieve social optimality by allocating permits based only on an external factor which is independent of output and emissions we then outline sufficient conditions for a socially optimal relative performance mechanism

estimating the peace dividend the impact of violence on house prices in northern ireland this article exploits data on the pattern of violence across regions and over time to estimate the impact of the peace process in northern ireland on house prices after establishing a negative correlation between killings and house prices we estimate the parameters of a markov switching model with conflict and peace as latent states we use the model to estimate the size of the peace dividend as captured in house price changes jel d74 r23 r31 conflict in ireland has a long history even after the republic of ireland was created as an independent state in 1920 the status of the mainly protestant north remained contested from the late 1960s a violent conflict flared up which claimed around 3 500 lives only more than two decades later from 1993 onwards emerged a peace process which while initially fragile culminated in a cessation of violence and a return to devolved government by 2007 the conflict was a major source of social and economic dislocation but as peace took hold this has begun to be repaired this paper assesses the impact of peace by using variation in violence within northern ireland to study one important economic aspect of the peace process and the dividend that it brought to residents of northern ireland the impact on house prices houses are assets whose prices reflect the present and future expected attrac tiveness of living in an area even during the height of the conflict in northern ireland violence was not uniform for example belfast the capital city of the province of northern ireland was particularly hard hit looking for economic consequences of the peace process we would therefore expect benefits to be concentrated among areas where violence was most prevalent we exploit within region variability in violence and house prices over time having such variation is rare in studies of the economic consequences of conflict our specific measure of violence is conflict related deaths these have been well documented by sutton 1994 and the conflict archive on the

evaluation of biodiversity policy instruments what works and what doesn t w e review and confirm the claim that credible evaluations of common conservation instru ments continue to be rare the limited set of rigorous studies suggests that protected areas cause modest reductions in deforestation however the evidence base for payments for ecosystem services decentralization policies and other interventions is much weaker thus we renew our urgent call for more evaluations from many more biodiversity relevant locations specifically we call for a programme of research conservation evaluation 2 0 that seeks to measure how programme impacts vary by socio political and bio physical context to track economic and environmental impacts jointly to iden tify spatial spillover effects to untargeted areas and to use theories of change to characterize causal mechanisms that can guide the collection of data and the interpretation of results only then can we usefully contribute to the debate over how to protect biodiversity in developing countries

immigration policy and counterterrorism abstract in a developing country terrorists recruit and allocate their capital skilled labor and unskilled labor between domestic and foreign targets domestic targets require less skilled labor than foreign targets under various strategic scenarios we show how countermeasures against the different terrorist inputs alter the amount and mix of targets as well as how skilled and unskilled immigration quotas by a targeted foreign country affect this mix of attacks we find that increases in skilled labor quotas generally reduce terrorist attacks in the foreign country especially when the terrorists reside in a skill scarce country a number of different strategic scenarios including leader follower are investigated

the impact of coalition offensive operations on the iraqi insurgency coalition offensive operations in iraq seek to disrupt insurgents and their networks but may also act as a recruitment tool for the insurgency we use data from coalition press releases and casualty reports to assess the total impact of these operations we find that two additional offensive operations come at a future cost of an additional coalition soldier s life the evidence suggests that rather than diminishing the insurgents appetite to wage counterattacks these operations may act as a recruitment tool for the insurgency we further find that while the insurgents change their level of operations in response to the coalition the coalition does not react to the insurgents

terrorism the relevance of the rational choice model terrorism in general and suicidal terrorism in particular is popularly seen as irrational but many economists and political scientists argue otherwise this paper distinguishes three different senses of irrationality unresponsiveness to incentives deviation from narrow self interest and failure of rational expectations it concludes that an intermediate position on the rationality of terrorism is appropriate the typical terrorist sympathizer deviates only slightly from homo economicus but active terrorists arguably stray from narrow self interest and rational expectations and suicidal terrorists probably violate both deterrence remains a viable anti terrorism strategy but deviations from rational expectations increase the potential of persuasion and appeasement

torture in counterterrorism agency incentives and slippery slopes abstract we develop a counterterrorism model to analyze the effects of allowing a government agency to torture suspects when evidence of terrorist involvement is strong we find that legalizing torture in strong evidence cases has offsetting effects on agency incentives to counter terrorism by means other than torture it lowers these incentives because the agency may come to rely on torture to avert attacks however it also increases these incentives because other efforts may increase the probability of having strong enough evidence to warrant the use of torture legalizing torture in strong evidence cases is more likely to reduce non torture efforts if these efforts are more effective at stopping attacks and less effective at turning up strong evidence when the suspect is guilty if it reduces non torture efforts it can reduce security and is more likely to do so if the attack threat is higher moreover if torture is used in strong evidence cases even if torture is banned legalizing torture in strong evidence cases necessarily reduces security if it reduces non torture efforts lastly it can increase incentives to torture even in weak evidence cases a slippery slope

driving fatalities after 9 11 a hidden cost of terrorism we show that the public s response to terrorist threats can have unintended consequences that rival the attacks themselves in severity driving fatalities increased significantly after the 11 september 2001 terrorist attacks events that prompted many travellers to substitute road transportation for safer air transportation after controlling for time trends weather road conditions and other factors we find that travellers response to 9 11 resulted in 327 driving deaths per month in late 2001 moreover while the effect of 9 11 weakened over time as many as 2300 driving deaths may be attributable to the attacks

noncooperative regulation of a nonlocalized externality with a nonlocalized pollution externality different groups bear the costs and benefits of abatement in the case of acid rain these groups are respectively consumers in the midwest and pollutees in the northeast these groups have conflicting interests that are represented respectively by a public utilities commission and an environmental regulator we analyze a model in which the environmental protection agency acting as a von stackelberg leader regulates pollution and the public utility commission regulates the price for a monopolist that has private information about the effectiveness of its abatement alternatives we characterize a noncooperative equilibrium and compare it with a cooperative equilibrium a nonlocalized pollution externality poses special regulatory problems when the benefits and the costs of abatement are borne by distinct groups whose interests are represented by different regulatory agencies a relevant example is acid rain which is believed to be caused in part by coal fired electricity generating plants these emit sulfur dioxide and nitrogen oxide which upon contact with moisture in the atmosphere form acid that falls with rain measures to reduce these emissions are of concern to the residents of the states in which the coal fired generating plants are located because abatement costs increase the prices they pay for electricity a number of plans have been proposed for distributing those costs more broadly but the costs of reducing the emissions of generating plants located in ohio will likely be borne in large part by ohio consumers and utilities while the benefits from abatement will largely be realized by the residents of the northeast and canada the control of a nonlocalized externality such as acid rain raises the issue of the relationship between the environmental regulator the environmental protection agency epa and the public utility commission the former is responsible for achieving an acceptable balance between the damage from pollution and the cost of abatement the latter is responsible for pricing electricity on the basis of the costs of production and pollution control one possibility is that cooperation between the two regulators leads to the joint regulation of emissions and prices cooperation would internalize the conflicting interests and mandates of the regulators but the distributive consequences of the regulatory alternatives inhibit cooperation the public utility commission for example has an interest in avoiding abate

racial harassment ethnic concentration and economic conditions in this paper we analyse the association between the spatial concentration of ethnic minorities and racial harassment ethnic concentration relates to racial harassment through at least three channels hostility in the attitudes of majority individuals that finds expression in harassment behaviour the probability that minority individuals meet majority individuals and the cost of expressing hostility aggressively thus harassment cannot simply be modelled as a stronger form of hostility using unique data for britain we show that in areas of higher local ethnic concentration experience of harassment is lower even though hostility on the side of the majority population is not

the economic returns to schooling in the west bank and gaza strip the author uses micro data from the labor force surveys conducted in the west bank and the gaza strip during 1981 91 to show that during 1981 87 wage differences between schooling groups fell by well over one half this sharp reduction is associated with large increases in the size of the educated palestinian labor force since the returns to schooling for israeli jews were stable the decline in returns to schooling for palestinians is consistent with the notion that the returns to schooling in the territories were determined largely by the forces of supply and demand in a segmented market for skilled labor copyright 1995 by american economic association

poverty political freedom and the roots of terrorism this article provides an empirical investigation of the determinants of terrorism at the country level in contrast with the previous literature on this subject which focuses on transnational terrorism only i use a new measure of terrorism that encompasses both domestic and transnational terrorism in line with the results of some recent studies this article shows that terrorist risk is not significantly higher for poorer countries once the effects of other country specific characteristics such as the level of political freedom are taken into account political freedom is shown to explain terrorism but it does so in a non monotonic way countries in some intermediate range of political freedom are shown to be more prone to terrorism than countries with high levels of political freedom or countries with highly authoritarian regimes this result suggests that as experienced recently in iraq and previously in spain and russia transitions from an authoritarian regime to a democracy may be accompanied by temporary increases in terrorism finally the results suggest that geographic factors are important to sustain terrorist activities this abstract was borrowed from another version of this item

human capital and the productivity of suicide bombers the authors empirical analysis suggests that older and more educated suicide bombers are being assigned by their terror organization to more important targets they find that more educated and older suicide bombers are less likely to fail in their mission and are more likely to cause increased casualties when they attack

input versus output monitoring who is the residual claimant abstract we observe that residual claimancy can be a source of rent in a principal agent relationship we show that the choice between input or output monitoring will be chiefly determined by the identity of the residual claimant of the principal agent relationship the principal will find input monitoring more efficient if the principal is the residual claimant and he will find output monitoring more efficient if the agent is the residual claimant if residual claimancy is a choice the principal will be the residual claimant under input monitoring under output monitoring residual claimancy is not an issue if both residual claimancy and the monitoring instrument can be chosen the principal will choose to monitor input and to be the residual claimant journal of economic literature classification numbers d23 d82 l22

the dynamics of incentive contracts the paper studies a simple two period principal agent model in which the principal updates the incentive scheme after observing the agent s first period performance the agent has superior information about his ability the principal offers a first period incentive scheme and observes some measure of the agent s first period performance cost or profit which depends on the agent s ability and unobservable first period effort the relationship is entirely run by short term contracts in the second period the principal updates the incentive scheme and the agent is free to accept the new incentive scheme or to quit the strategies are required to be perfect and updating of the principal s beliefs about the agent s ability follows bayes rule the central theme of the paper is that the ratchet effect leads to much pooling in the first period first for any first period incentive scheme there exists no separating equilibrium second when the uncertainty about the agent s ability is small the optimal scheme must involve a large amount of pooling the paper also gives necessary and sufficient conditions for the existence of partition equilibria and looks at the effect of cost uncertainty

retaliating against terrorism rational expectations and the optimality of rules versus discretion the application of rational expectations theory to policies of retaliation against terrorism suggests that only unexpected retaliations will be effective in causing terrorist attacks to deviate from their natural rate and that there is a time inconsistency problem in responding to terrorism since the optimal response rate to terrorism would never be believable to the terrorists the first best policy may be for the government retaliating against terrorism to have its response rate constrained by an externally imposed rule a time series intervention model of terrorist attacks against israel supports the natural rate hypothesis and therefore also the desirability of a retaliatory rule over policy discretion israeli retaliation for the 1972 munich massacre was the first israeli retaliation of unexpectedly large magnitude and it produced a temporary deviation of terrorist attacks from the natural rate retaliation has no long term deterrent or escalation effect

assassinations evaluating the effectiveness of an israeli counterterrorism policy using stock market data since the outbreak of the intifada in september 2000 the israeli government has extensively employed a policy of assassinating members of palestinian terrorist organizations theoretically the net effect of an assassination on future terrorism is indeterminate because it embodies two conflicting effects the assassination of a terrorist hurts his organization s capabilities but may increase the motivation for future attacks our indirect empirical evaluation of the effectiveness of assassinations for isreali counterterrorism is based on israeli stock market reactions to news of such operations we rely on the fact that terrorism has had significant adverse effects on the israeli economy and claim that the stock market should react positively to news about effective counterterrorism measures but negatively to news about counterproductive ones we find that the market does not react to assassinations of low ranked members of palestinian terrorist organizations the market does react strongly however to the assassinations of senior leaders of terrorist organizations it declines following assassinations targeting senior political leaders but rises following assassinations of senior military leaders to the extent that these reactions reflect expectations regarding future levels of terrorism they imply that the market perceives the first type of assassinations as counterproductive but the second as an effective measure in combating terrorism

adverse selection and renegotiation in procurement as was shown by dewatripont optimal long term contracts are generally not sequentially optimal the parties ex post renegotiate them to their mutual advantage this paper fully characterizes the equilibrium of a simple two period procurement situation and studies the extent to which renegotiation reduces ex ante welfare i a central result is that like in the non commitment case the second period allocation is optimal for the principal conditionally on his posterior beliefs about the agent ii the first period allocation exhibits an increasing amount of pooling when the discount factor grows iii with a continuum of types it is never optimal to induce full separation the paper also analyzes whether renegotiated long term contracts yield outcomes resembling those under either unnegotiated long term contracts or a sequence of short term contracts and it links the analysis with the multiple unit durable good monopoly problem

does terrorism work this paper examines whether terrorism is an effective tool for achieving political goals by exploiting geographic variation in terror attacks in israel from 1988 to 2006 we show that local terror attacks cause israelis to be more willing to grant territorial concessions to the palestinians these effects are stronger for demographic groups that are traditionally right wing in their political views however terror attacks beyond a certain threshold cause israelis to adopt a less accommodating position in addition terror induces israelis to vote increasingly for right wing parties as the right wing parties move to the left in response to terror hence terrorism appears to be an effective strategy in terms of shifting the entire political landscape to the left although we do not assess whether it is more effective than non violent means

electoral terms and terrorism many terror attacks occur at the beginning of electoral terms we present a game theoretical model with incomplete information to account for this empirical pattern both terrorists and governments can be of weak or strong types we find that the risk of terror attacks is highest at the beginning of electoral terms because striking early allows the terrorists to collect valuable information about the government s type and also because terrorists know that even initially weak governments sometimes retaliate to show toughness closer to an upcoming election the model s predictions are consistent with anecdotal evidence

emergent extremism in a multi agent model of religious clubs i introduction religious extremism is as old as religion itself but the tendency to promote militancy and terrorism from within extremist religions appears to be much more common now than in times past juergensmeyer 2001 stern 2003 wiktorowicz 2005 1 today s terrorists routinely frame their objectives in religious terms and organize their activities within religious movements this shift is not due to increased militancy within religion as a whole not even within the stricter subset of religious groups commonly labeled sectarian or fundamentalist bromley and melton 2002 marty and appleby 1995 rather groups with militant objectives are increasingly leveraging the latent potential for violence within extremist religion krueger and maleckova 2003 and krueger 2007 have shown that contrary to popular hypotheses regarding the salience of poverty and education it is instead institutional conditions such as civil liberties that contribute to the origination of terrorists within a country religious extremism has been shown to be a potentially powerful input into the production of terrorism berman 2004 2 and the origination of terrorists has been empirically connected to civil liberties we seek to complete the triangle and connect religious extremism to social conditions in an extension of existing theory and test the predictions of the model in an empirical context with an eye toward civil liberties this paper extends previous models of religious clubs to better account for observed patterns of extremism across different settings and test policies most likely to reduce the appeal of extremism economists at first blush should have trouble explaining the survival of groups that demand large sacrifices from their members successful religious groups however routinely impose all sorts of apparently unproductive costs on their members iannaccone 1992 introduced a formal model of religious clubs within which apparently irrational sacrifice and stigma enhances the individual and collective utility his model demonstrated the feasibility of extremist groups but does less to explain the relative prevalence of extremism across time and place further the original model allows for only corner solutions and as such the viability of extreme groups is indistinguishable from the viability of the more moderate groups they must compete with for members in the religious marketplace in section ii we revisit analyze and extend the club model of religion we push the analysis of the original model exploring sacrifice substitutability of club and private goods and their relationships to member commitment and the viability of extremist groups in this preliminary analysis we illustrate not only the potential insights of the club theory of religion into the strength and viability of extremist groups but also the limitations inherent to the representative agent model we proceed by extending the model in a multi agent ma computational framework this framework permits us to analyze the distributions of agents and clubs that make up a religious economy the computational nature of the model is critical because it allows for sufficient heterogeneity of agents and clubs and given this heterogeneity agent decision making absent closed form solutions via nash equilibria extremists groups emerge as just one segment the high cost tail of a distribution of religious clubs that range across the full spectrum of potential group imposed sacrifice and stigma extremism is identifiable and comparable in the model because it exists within a full spectrum of clubs by varying the parameters of the model that control the distribution of secular wages across agents and the degree of substitutability between religious and secular commodities we can better explain where and when religious extremism is most popular its strength relative to more moderate groups and which economic policies reduce its prevalence

poverty and civil war revisiting the evidence abstract previous research has interpreted the correlation between per capita income and civil war as evidence that poverty is a main determinant of conflict in this paper we find that the relationship between poverty and civil war is spurious and is accounted for by historical phenomena that jointly determine income evolution and conflict in particular the statistical association between poverty and civil wars disappears once we include country fixed effects also using cross section data for 1960 to 2000 we find that once historical variables like european settler mortality rates and the population density in 1500 are included in civil war regressions poverty does not have an effect on civil wars these results are confirmed using longer time series from 1825 to 2000

international investment agreements and services markets locking in market failure summary bilateral investment treaties bits and investment chapters in preferential trade agreements have become popular measures to guarantee investor friendly policies while they reassure multinational firms they also constrain host country authorities in regulating markets to stimulate competition these problems are widespread in service industries characterized by significant economies of scale this paper presents case studies of the difficulties the chilean regulatory authorities faced in regulating the financial services telecom and energy industries it concludes that able regulators are necessary but that international agreements need to also leave enough policy space

an economist looks at suicide terrorism suicide terrorism has an economic aspect the organisation of a suicide mission requires an incentive a voluntary transaction and a contract that is enforceable by the parties to it a terrorist faction that competes for power in a community that is both oppressed and oppressive provides young people with an incentive to invest in an identity that is rendered more valuable by death suicide attacks are then the outcome of a voluntary agreement between the faction and the young person to trade life for identity the institution of the living martyr renders the agreement privately enforceable thus suicide terrorism is the outcome of an individual rational choice there are some implications for counter measures

macroeconomic consequences of terror theory and the case of israel abstract this paper analyzes the effect of terror on the economy terror endangers life such that the value of the future relative to the present is reduced hence due to a rise in terror activity investment goes down and in the long run income and consumption go down as well governments can offset terror by putting tax revenues into the production of security facing a tide in terror a government that acts optimally increases the proportion of output spent on defense but does not fully offset the tide thus when terror peaks the long run equilibrium with an optimizing government is of lower output and welfare next we show that this theory of terror and the economy helps to understand changes in trend and business cycle of the israeli economy the estimates show that terror has a large impact on the aggregate economy continued terror at the level of the death toll by about the same size as due to car accidents is expected to decrease annual consumption per capita by about 5 in 2004 had israel not suffered from terror during the last 3 years we estimate that the output per capita would have been 10 higher than it is today

the roles of foreign aid and education in the war on terror this paper presents a theoretical framework and some empirical results showing that the level of foreign aid received reduces the supply of terrorist attacks by recipient countries as does the recipient country s level of education due account is taken of endogeneity problems in producing these results they suggest that western democracies which are the main targets of terrorist attacks should invest more funds in foreign aid with a special emphasis on supporting education

should we pay for ecosystem service outputs inputs or both payments for ecosystem service outputs have recently become a popular policy prescription for a range of agri environmental schemes the focus of this paper is on the choice of contract instruments to incentivise the provision of ecosystem service outputs from farms the farmer is better informed than the regulator in terms of hidden information about costs and hidden actions relating to effort the results show that with perfect information the regulator can contract equivalently on inputs or outputs with hidden information input based contracts are more cost effective at reducing the informational rent related to adverse selection than output based contracts mixed contracts are also cost effective especially where one input is not observable such contracts allow the regulator to target variables that are costly to fake as opposed to those prone to moral hazard such as effort further results are given for fixed price contracts and input based contracts with moral hazard the model is extended to include a discussion of repeated contracting and the scope that exists for the regulator to benefit from information revealed by the initial choice of contract the models are applied to a case study of contracting with farmers to protect high biodiversity native vegetation that also provides socially valuable ecosystem services

on the value of commitment with asymmetric information several recent papers have emphasized that long term relationships can be efficiently governed by short term contracts provided that there is no asymmetric information at the contracting dates this excludes not only adverse selection problems but also moral hazards problems in which hidden actions generate private information over the future in this paper we show in the context of a multiperiod principal agent relationship with adverse selection that renegotiable short term contracts can be as efficient as long term renegotiation proof contracts on the other hand spot contracting may fail to achieve long run efficiency not only because of intertemporal smoothing as with symmetric information but also because of ratchet effects and time inconsistency in the optimal structure of informational rents thus some limited commitment seems to be a necessary and sufficient condition to achieve long run efficiency

the strategy of manipulating conflict two decision makers choose hawkish or dovish actions in a con ict game with incomplete information the decision making can be manipulated by extremists who send publicly observed cheaptalk messages the power of extremists depends on the nature of the underlying con ict game if actions are strategic complements a hawkish extremist provocateur can increase the likelihood of con ict by sending messages which trigger a fear spiral of hawkish actions this reduces the welfare of both decision makers if actions are strategic substitutes a dovish extremist paci st can send messages which cause one decision maker to back down and become more dovish this reduces his welfare but bene ts the other decision maker the hawkish extremist is unable to manipulate the decision makers if actions are strategic substitutes and the paci st is equally powerless if actions are strategic complements

long term short term and renegotiation on the value of commitment in contracting spot contracting generally involves efficiency losses relative to long term contracting it is proved here that short term contracting and renegotiation allow to achieve long run efficiency when transfers are not limited objectives are conflicting and no relevant asymmetric information appears at recontracting dates this last assumption excludes adverse selection but not moral hazard when technologies and preferences are time separable copyright 1990 by the econometric society

the political economy under monetary union has the euro made a difference economic and monetary union emu has transformed europe and has created an integrated pan european economy much research has focused on understanding this integration process and what benefits and costs it entails this paper identifies a political economy channel of emu as the monetary union implies that member states had to transfer or at least curtail their policy autonomy in several areas such as monetary policy and fiscal policy the paper shows that emu has helped reduce the impact of political shocks on the domestic economy of member states but magnified the transmission of political shocks within the euro area equally importantly economies with weak domestic policies and institutions exhibited a significantly higher sensitivity to domestic political shocks before emu but not thereafter while this may entail that emu has brought benefits to countries with weaker policies and institutions by insulating them from adverse political developments at home a potential drawback is that it may provide weaker market discipline for domestic political stability marcel fratzscher and livio stracca

small investment and large returns terrorism media and the economy the study investigates the role of the media in the impact of terrorism on the economy a unique data set of the newspaper articles that reported terrorist attacks during 2002 is used to evaluate their impact on the tel aviv stock exchange an econometric analysis is performed in order to understand how a newspaper decides to cover a terrorist attack i e the number of articles positioning of articles whether to include photos and the size of headlines it was found that media coverage is an important channel through which terrorism produces economic damage the findings also showed that the economic damage caused by terrorist attacks increases monotonically with the amount of media coverage it was also found that the economic impact of the media coverage diminishes over time

hiding in plain sight using signals to detect terrorists this paper studies the interaction between a governmental security agency as the transportation security agency or the immigration and naturalization service and a terrorist organization like al qaeda the governmental agency wants to stop the terrorists but first must infer whether a visa applicant or an airline passenger is a terrorist on the basis of some observable signal the terrorist organization s objective is to get past security to commit murder and mayhem we derive the equilibrium strategy for this signaling model and evaluate specific anti terrorist policies as the creation of the new homeland security agency and increased airport security screening

panic on the streets of london police crime and the july 2005 terror attacks in this paper we study the causal impact of police on crime by looking at what happened to crime before and after the terror attacks that hit central london in july 2005 the attacks resulted in a large redeployment of police officers to central london boroughs as compared to outer london in fact police deployment in central london increased by over 30 percent in the six weeks following the july 7 bombings during this time crime fell significantly in central relative to outer london study of the timing of the crime reductions and their magnitude the types of crime which were more likely to be affected and a series of robustness tests looking at possible biases all make us confident that our research approach identifies a causal impact of police on crime implementing an instrumental variable approach shows an elasticity of crime with respect to police of approximately 0 3 so that a 10 percent increase in police activity reduces crime by around 3 percent

rockets the housing market effects of a credible terrorist threat abstract this paper explores the economic costs of conflict using a unique experiment we analyze the effects of hezbollah s massive surprise rocket attack against northern israel during the 2006 second lebanon war and the continued threat posed by the organization s expanding rocket arsenal on the housing market the labor market and patterns of migration flows and sorting relying on hedonic and repeat sales approaches and using a difference in differences identification strategy for 2000 2012 we show that the attack led to a 6 7 decline in house prices and rents in the most severely hit localities relative to other localities in northern israel these effects persisted until 2012 suggesting that the public continued to view the rocket threat as credible in contrast we find practically no effect on labor market conditions migration flows and sorting

the role of freedom growth and religion in the taste for revolution a fundamental question about the determinants of civil conflict is the relative importance of political freedoms versus economic development this paper takes a new approach to provide an answer by using micro data based on surveys of revolutionary tastes of 130 000 people living in 61 nations between 1981 and 1997 controlling for personal characteristics country and year fixed effects more freedom and economic growth both reduce revolutionary support losing one level of freedom equivalent to a shift from the us to turkey increases support for revolt by 4 percentage points to reduce support by the same amount requires adding 14 percentage points onto the gdp growth rate being muslim in a free country has no effect on the probability of supporting revolt compared to a non religious person however being muslim in a country that is not free increases it by 13 percentage points being christian in a free country decreases the chance of supporting revolt by 4 percentage points compared to a non religious person and in a not free country by 1 percentage point

studying the role of political competition in the evolution of government size over long horizons here we argue for the use of cointegration and error correction analysis to combine economic factors that are nonstationary with political factors that are stationary into an empirical model of the evolution of public policy over long periods the approach is applied to disentangle the contributions of economics and politics to the evolution of public expenditure by the government of canada over 130 years political competition emerges as the primary political factor affecting government size

asset market perspectives on the israeli palestinian conflict this paper locates turning points in the israeli palestinian conflict since the late 1980s using asset market data from israel and the palestinian authority pa we find that major escalations in violence such as the outbreak of the intifada in 2000 lead to significant declines in asset prices in both israel and the pa conversely major peace initiatives such as the oslo accords in 1993 and the road map plan in 2003 lead to substantial increases in asset prices on both sides of the conflict an additional novel finding is that asset markets respond positively to the success of politicians who favour a negotiated settlement to the conflict

the economics of counterterrorism a survey we provide a review of theoretical and empirical contributions on the economic analysis of terrorism and counterterrorism we argue that simple rational choice models of terrorist behavior in the form of cost benefit models already provide a well founded theoretical framework for the study of terrorism and counterterrorism we also hint at their limitations which relate to the failure of accounting for the dynamics between terrorism and counterterrorism that may produce unintended second order effects as well as for the costs associated with counterterrorism and its international dimension we reevaluate previously proposed counterterrorism strategies accordingly finally in the light of our findings we discuss interesting areas of future research

contract design for the purchase of environmental goods from agriculture an environmental stewardship program whereby farmers are paid directly for the environmental goods they provide is developed by combining the microparameter distribution model with mechanism design principles the program overcomes the information asymmetry between farmers and governments and accounts for the deadweight losses from distortionary taxes the characteristics of optimal input and payment schedules of the program are derived these optimal schedules are determined by the tradeoffs between farming profits environmental benefits and deadweight losses from taxes and are second best except under restrictive conditions on deadweight losses from taxes and on the marginal product of inputs and marginal pollution costs

income inequality and the taste for revolution abstract although property rights are the cornerstone of market economies throughout history existing claims have been frequently overturned by revolutions one unsettled question is whether income inequality affects the likelihood of revolt this paper takes an approach different from previous studies by introducing data derived from two surveys of revolutionary preferences across a quarter million randomly sampled individuals more people are found to have a preference for revolt when inequality in their nation is high a 1 standard deviation increase in the gini coefficient explains up to 38 percent of the standard deviation in revolutionary support the results hold after controlling for a set of personal characteristics and country and year fixed effects since higher levels of income are found to have a negative impact on the taste for revolt the results suggest that either going for growth or implementing policies that reduce inequality can buy off those individuals with revolutionary preferences

international terrorism causes consequences and cures a popular view is that international terrorism is on the increase that it is religiously motivated and that it has important adverse consequences this paper investigates this view it examines the empirical evidence on the causes of international terrorism from the late 1960s to the early 2000s and discovers that while religion has had a part to play explanations based on economics and politics appear to be consistent with the facts terrorists come from relatively poor and undemocratic countries and commit attacks in relatively rich and democratic ones the paper then examines the micro macro and global economic effects of international terrorism from both a theoretical and empirical angle and discovers that the negative effect on domestic aggregate demand is temporary and the effect on aggregate supply insignificant finally the paper explores policies to deal with international terrorism and demonstrates that this is complex analogies with conventional crime may be unhelpful

myth and reality of pension reform the latin american evidence abstract starting in 1981 with chile to the end of 2000 10 countries in latin america implemented structural pension reforms totally or partially privatizing their former public systems the latin american models have shaped similar reforms in eastern europe and influenced changes in western europe and the current debate in the united states in 1999 the then chief economist of the world bank nobel laureate joseph stiglitz coauthored with peter orszag a provocative paper examining the myths of the narrowly interpreted reform model sponsored by the bank but without using crucial data from latin america this article contrasts 12 myths of structural pension reforms in that region with data collected from eight countries in the last seven to 20 years confirming and expanding several of orszag and stiglitz s conclusions

poverty and crime in 19th century germany we estimate the impact of poverty on crime in 19th century bavaria germany rainfall is used as an instrumental variable for grain rye prices to address econometric identification problems in the existing literature the rye price was a major determinant of living standards during this period the rye price has a positive effect on property crime a one standard deviation increased property crime by 8 ols estimates are twice as large as instrumental variable estimates highlighting the value of our empirical approach higher rye prices lead to significantly less violent crime though and we argue that higher beer prices caused by the higher rye prices are a likely explanation

the cycle of violence an empirical analysis of fatalities in the palestinian israeli conflict thomas c schelling s the strategy of conflict 1960 laid the groundwork for thinking about conflicts as non zero sum games in which each side may choose to exercise or threaten violence in order to deter or incapacitate the opponent or simply to exact revenge it has been difficult however to test many of the predictions formulated by schelling and others because of the lack of data on the strategic choices of the two sides engaged in a conflict observed at a high enough frequency for statistical tests to have any power this paper uses daily frequency data to analyze the dynamics of violence during four years of the second intifada the most recent outburst of the palestinian israeli conflict

regulatory policy design for agroecosystem management on public rangelands this paper analyzes regulatory design for agroecosystem management on public rangelands we present an informational and institutional environment where three of the most prominent regulatory instruments on public rangelands input regulation cost sharing taxation and performance regulation can be de ned and compared the paper examines how the optimal regulation is shaped by the informational and institutional constraints faced by federal land management agencies flmas such as the bureau of land management and the u s forest service these constraints include informational asymmetries between ranchers and flmas limitations on flmas ability to monitor ranch level ecological conditions and constraints on flmas actions due to budget limitations and restrictions on the level of penalties they can assess the theoretical model extends the previous work of baker 1992 prendergast 2002 and hueth and melkonyan 2009 by considering optimal regulation by a budget constrained regulator in an environment of asymmetric information and moral hazard

terrorism democratization and us foreign policy members of the american foreign policy establishment argue that the united states should combat transnational terrorism by encouraging democratization yet empirical studies indicate that democratization may increase political violence thereby raising the question why would american policymakers favor democratization when the empirical record shows that this course of action is so dangerous this study develops a game theoretic model to analyze the effect of democratization on terrorism the model demonstrates that the united states uses the commitment problems created by democratization to solve the moral hazard problem created by supporting autocratic hosts these empirical implications are tested using a combination of two datasets

optimal electoral timing exercise wisely and you may live longer using insights from option pricing in finance we explore the electoral timing problem in a flexible term democracy we assume that politic ally heterogeneous voters continuously learn over time about the evolving party merits this yields a mean reverting stochastic process for the support of the parties the incumbent sees its poll support and must call an election within five years o f the last election we assume that it wishes to maximize its expected total time in office so that this resembles the optimal exercise rule for an american financial o ption we characterize how the renewable election option behaves as waiting and stopping values interact we then calibrate our model to the labour tory rivalry in the u k with polling data from 1943 2005 and the 16 elections after 1945 excluding three elections essentially forced by weak governments our maximizing story explains when the elections were called quite well we also measure the value of election options finding that over the long run they should more than double the expected time in power of a fixed term electoral cycle