Volume 15, Issue 1

This paper analyzes the relationship between Palestinian suicide bombings and economic and political conditions. Labor market conditions can affect the frequency of attacks because when the economy worsens, the opportunity cost of being a terrorist decreases. An alternative explanation is that suicide bombings are responses to changes in the political environment. This paper examines these alternative explanations by estimating count data regression models of the occurrence of Palestinian terrorist attacks from 1993 to 2004. Contrary to the previous literature, this paper finds that economic conditions are correlated with suicide terrorism. Specifically, deteriorating local labor market conditions during the al-Aqsa Intifada account for nearly half of the increase in suicide bombings during that time.

We develop a model to examine regional, or geographical, allocation of defence spending in a nation, which is actuated by electoral motives of an incumbent government. We posit that the spatial impact of defence spending can be enormous as defence spending offers a host of local public goods to a regional economy and thereby determines the competitiveness of regional producers/firms in the national, or global, economy. Allocation of defence spending can thus impact on and drive regional inequality within a nation. In this sense, regional inequality is treated as an endogenous variable in our model. We explore how the politics of allocation of defence spending can create an equilibrium regional inequality in a stylized model. In a wider policy context, it is generally recognised that the efficacy of any public policies becomes problematic in oligopolistic markets as the conclusions of theoretical models are extremely sensitive to the assumed degree/nature of competition in oligopolistic markets. To overcome this general weakness of the literature, our major innovation is to make both the nature of competition and allocation of defence spending endogenous and, thereby, to provide a framework that explains both these elements. We establish that the structure of industry, conduct of rival firms, nature of competition in oligopolistic markets and regional inequality will largely depend on the proposed electoral equilibrium and, hence, will be extremely sensitive to voters' preferences and their characteristics.

North Korea's nuclear program is a threat to sustained stability on the Korean peninsula. Unfortunately, the traditional notion of “Atoms for Peace'' has been a failure in the engagement of the North. In this paper we propose a novel approach to mutual cooperation in energy provision on the Korean peninsula, premised on having North Korea host reactors that deliver energy to South Korea. We establish conditions where there exists a stable, time-consistent equilibrium where the North never finds it in its interest to disrupt energy supplies to the South, and where the South is willing to pay the fixed costs of nuclear plant construction in exchange for a discounted stream of energy supply from the North. We also show that third-party income streams can augment the cooperative relationship.

In many countries governments are helpless to prevent appropriation, whatever the degree of protection promised by the law. In this context, we use a simple model where workers can either work peacefully or join a guerrilla movement that expropriates entrepreneurs. We find one low-income, low-wage equilibrium with guerrilla activity and one peaceful, high-income, high-wage equilibrium. We show that the peaceful equilibrium can be reached if entrepreneurs implement standard remedies for the internal principal-agent problem such as efficiency wages.

This paper reports the effect of intra- and international conflict on domestic investment in South America from 1950-2000. We combine data from the Penn World Table 6.1 and the Militarized Interstate Dispute Dataset from the Correlates of War project in a spatial investment accelerator model. We find that the magnitude of conflicts (total fatal casualties) is associated with diminished domestic investment, in magnitudes that range from 0.1 percent to one third of total investment across South America's experience in civil wars, conflicts and ethnic wars. We find no evidence of spatial spillovers in South America's civil wars. The paucity of international conflicts in the region leads us to conclude there is no more than suggestive evidence of large impacts and spatial spillovers of international conflicts.

This paper provides evidence of the impact of intra- and interstate wars on country income. War data for 1970-2000 are obtained from the Correlates of War project and merged with national income data from the Penn World Table 6.1 and World Bank demographic data for 90 countries. The results show that no straightforward relationship exists between war and economic well-being, since war need not decrease GDP, and might in fact raise it. Civil war is found to generally reduce income (as in examples of Angola, Chad, or Congo), but in India war actually raised income. The effect of international war on the economy is more ambiguous: in Egypt, Iran, and Uganda, GDP per capita decreased during war time, but in Israel, Syria, and China, GDP per capita actually grew during war. The study also finds that negative effects of wars are stronger in the short run, and that low-growth countries engage in civil war, while high-growth countries fight international wars.

A state does not have power in isolation from others without considering its linked interactions to others nor from system structure without considering its structural positions in the system; rather, it has power as a consequence of its interactive relations with other states in the system and its structural positions in the networks of relations. This paper proposes a new power concept, using the social network perspective, called "structural network power," defined as the power of an individual state arising from its location within the networks of international relations. Adapting this new network power concept, this paper also assembles and provides the data on the new measure of national power (SNPI, Structural Network Power Index) 1950-2000 for all states existing in the international system.

This note focuses on a methodological issue that arises naturally in applications of the traditional deterrence game played under two-sided incomplete information. The problem has potentially interesting implications for the status of the conclusions we draw from various applications of the traditional deterrence game.

A list of of referees/reviewers for 2009 for Peace Economics, Peace Science and Public Policy.