Economics of Terrorism and Counter-Terrorism Measures : History, Theory, and Evidence

This textbook presents a systematic study of terrorism from the standpoint of economic analysis. Choosing the kind and level of measures to counter terror is, to a large extent, an economic decision, as counterterrorism (CT) measures and their side effects are costly. This text, contains theoretical models that illustrate the economic mechanisms of different types of CT measures. A vast array of empirical studies and regularities are also presented. Some chapters discuss in depth the empirical results in the literature as well as the underlying statistical/econometric methodologies that go beyond ordinary regression. General Appendix A provides an exposition of the concept of compensating surplus and elements of the basic game theory, to help the reader with an economics background recapitulate micro theory concepts used in the book. General Appendix B lays out the notions of hypothesis testing, regression and more advanced statistical/econometric methods, so that the reader understands or at least can have an intuitive idea of how the results are derived and what they mean with some degree of inner comfort. Aimed at students at the intermediate undergraduate and graduate levels, the text requires knowledge of basic micro, first-order conditions of profit or utility maximization and cost minimization, and statistical concepts of hypothesis testing and regression. This textbook is intended for use in courses in economics, political science, criminal justice, and emergency management. Additionally, professionals working with national security in government and non-governmental organizations may find it useful. Preface Abbreviations I Introduction 1 Introduction 1.1 What This Book Is About and My Goals 1.2 On the Current Chapter 1.3 Rationality, Economics, and Terrorism 1.4 What Is Terrorism? 1.4.1 Various Definitions 1.4.2 Attributes 1.4.3 Long-Term Objectives of Some Terror Organizations 1.4.4 Three Players in a ``Terrorist Act'' 1.4.5 Terrorism, Freedom Fighting, Insurgency, and Civil War 1.5 Modes/Tactics of Terror Attack 1.6 Domestic Versus Transnational Terrorism 1.7 Global Terrorism: A Preliminary Look 1.7.1 Overall Impact of Terrorism across Countries 1.7.2 Deaths from Terrorism 1.7.3 Is Islamic Fundamentalism the Prime Motivation behind Lone-Wolf Attacks? 1.8 Major International Terror Organizations 1.9 US Listing of Foreign Terrorist Organizations and their State Sponsors 1.10 Terror Organizations in the USA 1.11 Different Strands of Islam and Sharia Law 1.11.1 Two Main Sects: Sunnies and Shi'ites 1.11.2 Strands within Sunni and Shi'ite Muslims 1.11.3 Sharia Law and Islamic Taxes 1.11.4 How are Different Sects and Schools Related to Islamic Terrorism? 1.12 Women Participation in Terror Organizations 1.13 Internet and Terrorism 1.14 Counter-Terrorism Measures 1.14.1 A Classification 1.15 Root, Breeding and Propagating Factors and Preventive Measures 1.16 Plan of the Book 1.17 Aspects of Terrorism Not Covered in the Book 1.18 Take-Aways Appendix 1.A Details on Islam Religion 1.A.1 Strands within Sunnis 1.A.2 Strands within Shi'ites 1.A.3 Other Sects 1.A.4 Sufism 2 Origin, Objective, and History of Terrorism and Terrorist Organizations 2.1 Introduction 2.2 Origin of Terrorism 2.3 Modern Terrorism: Four Waves 2.4 Anarchism, the First Wave 2.4.1 Narodnaya Volya 2.4.2 Spread of Anarchism and the Philosophy of Narodnaya Volya 2.5 Anti-Colonial, the Second Wave 2.5.1 The Original IRA (OIRA)—First Generation 2.5.2 Anti-Treaty IRA or the ``Irregulars''—the Second Generation 2.5.3 Israel and Palestine: Haganah, Irgun Zvai Leumi, and Lehi 2.5.4 Cyprus: Ethnikí Orgánosis Kipriakoú Agónos (EOKA) 2.5.5 Algeria: Front de Libération Nationale (FLN) 2.6 The New Left, the Third Wave 2.6.1 American Weather Underground 2.6.2 Action Directe, France 2.6.3 Red Army Faction (RAF), West Germany 2.6.4 Revolutionäre Zellen (RZ) 2.6.5 The Italian Red Brigades 2.6.6 The Japanese Red Army (JRA) 2.6.7 Revolutionary Armed Forces of Colombia (FARC) 2.6.7.1 Narrative 2.6.7.2 Funding 2.6.7.3 Public Services 2.6.7.4 Current Status of Violence in Colombia 2.6.8 The National Liberation Army (ELN), Colombia 2.6.9 Shining Path, Peru 2.6.9.1 Narrative 2.6.9.2 Funding 2.6.10 Tupac Amaru Revolutionary Movement (MRTA), Peru 2.6.11 Tupamaros, Uruguay 2.6.12 Farabundo Marti National Liberation Front (FMLN) 2.6.13 Naxalites: India 2.6.14 Khmer Rouge* 2.6.15 The New People's Army (NPA): The PhilippinesMost of the information is based on White:17 and Stanford:15b. 2.6.15.1 Narrative 2.6.15.2 Funding 2.7 Secular Terror Groups Overlapping between the Third and Fourth Wave Era 2.7.1 The Provisional IRA (PIRA)—Third Generation 2.7.1.1 Narrative 2.7.1.2 Funding 2.7.2 Real IRA—the Fourth Generation 2.7.2.1 Narrative 2.7.2.2 Funding 2.7.3 The Euskadi Ta Askatasuna (ETA) 2.7.4 Kurdistan Workers' Party (PKK) and Other Kurdish Groups 2.7.4.1 Narrative 2.7.4.2 Funding 2.7.4.3 Social Services: Rights of Women 2.7.4.4 Kurdish Population Outside of Turkey 2.7.5 Palestine Liberation Organization (PLO) and Fatah 2.7.5.1 Narrative 2.7.5.2 Funding 2.7.6 Popular Front for the Liberation of Palestine (PFLP) and PFLP-GC 2.7.7 Black September 2.7.8 Abu Nidal Organization (ANO) 2.7.9 Al-Aqsa Martyrs Brigades 2.7.10 Liberation Tigers of Tamil Eelam (LTTE): Tamil Tigers 2.7.10.1 Narrative 2.7.10.2 Organization and Capabilities 2.7.10.3 Funding 2.7.10.4 Other Aspects 2.7.11 Nicaraguan Democratic Force (FDN) and the Nicaraguan Resistance 2.8 Religious, the Fourth Wave 2.8.1 Beginning of the Fourth Wave 2.8.1.1 The Iranian Revolution 2.8.1.2 Attack on the Grand Mosque of Mecca 2.8.1.3 Soviet Invasion of Afghanistan 2.8.2 Major Terror Organizations During the Fourth Wave: Two Groups 2.8.3 Al-Qaeda and Its Affiliates 2.8.3.1 Main Al-Qaeda 2.8.3.2 Al-Qaeda of Iraq and Birth of ISIS 2.8.3.3 Al-Qaeda in the Islamic Maghreb (AQIM) 2.8.3.4 Al-Qaida in the Arabian Peninsula (AQAP) 2.8.3.5 Deaths from al-Qaeda and its Affiliates 2.8.3.6 International Spread of al-Qaeda and Its Affiliates 2.8.3.7 Funding of al-Qaeda 2.8.4 ISIS, ISIL, or IS 2.8.4.1 Territorial Gains and Losses 2.8.4.2 Outside of Iraq and Syria 2.8.4.3 Foreign Recruits 2.8.4.4 Governance and Social Services 2.8.4.5 Funding 2.8.4.6 ISIS in Subsequent Years 2.8.5 Al-Nusra, renamed Jabhat Fateh al Sham in 2016 and Tahrir al-Sham in 2017 2.8.6 Taliban 2.8.6.1 Narrative 2.8.6.2 Governance and Provision of Public Goods and Services 2.8.6.3 Funding 2.8.6.4 Peace Efforts, The Leap Day Accord and Afterwards 2.8.7 Haqqani Network (HN) 2.8.8 Pakistani Taliban: Tehreek-e-Taliban Pakistan (TTP) 2.8.9 Boko Haram 2.8.9.1 Narrative 2.8.9.2 International Spread of Boko Haram 2.8.9.3 Funding 2.8.10 Hamas 2.8.10.1 Narrative 2.8.10.2 Public Service 2.8.10.3 Funding 2.8.11 Hezbollah 2.8.11.1 Narrative 2.8.11.2 Governance and Social Services 2.8.11.3 Funding 2.8.12 Kata'ib Hezbollah 2.8.13 Palestinian Islamic Jihad (PIJ) 2.8.13.1 Narrative 2.8.13.2 Funding 2.8.13.3 More Recent Status 2.8.14 The Egyptian Islamic Group (IG) 2.8.15 Egyptian Islamic Jihad 2.8.16 Lashkar-e-Taiba (LeT) and Jamaat-ud-Dawa (JuD) 2.8.16.1 Narrative 2.8.16.2 Political Activities 2.8.16.3 Social Services 2.8.16.4 Funding 2.8.16.5 More Recent Status 2.8.17 Al-Shabaab 2.8.18 Jemaah Islamiyah (JI) 2.8.19 Islamic Revolutionary Guard Corps (IRGC) 2.8.20 The Lord's Resistance Army (LRA) 2.8.21 Similarities and Dissimilarities among Islamic Terror Organizations 2.8.21.1 Al-Qaeda, ISIS, Boko Haram on One Hand and Taliban on the Other 2.8.21.2 Al-Qaeda versus ISIS versus Al-Nusra 2.8.21.3 Fatah versus Hamas 2.8.21.4 Hamas versus Hezbollah 2.9 Terror Groups in Russia, Central Asia, China, South and South-East Asia, and the USA 2.9.1 Russia: The North Caucasus Region 2.9.1.1 Caucasus Emirate 2.9.2 Central Asia 2.9.3 China 2.9.4 South and South-East Asia 2.9.4.1 Indonesia 2.9.4.2 India 2.9.4.3 Bangladesh 2.9.4.4 The United States 2.10 ``Quasi Terror'' Groups 2.10.1 Ku Klux Klan (KKK) 2.10.2 National Social Underground 2.11 End of the Fourth Wave and Beyond 2.12 Take-Aways 3 Tracking Terror: Trends and Patterns 3.1 Introduction 3.2 Data Sources 3.3 Terrorism around the World: 1970 Onward 3.3.1 Number of Incidents and Fatalities: All Types of Terror Attacks 3.3.2 Success Rate 3.3.3 How Deadly are Terror Attacks? 3.3.4 Suicide Terror Attacks 3.3.5 Tactics and Weaponry 3.3.5.1 Bombing-Explosion and Armed Assault: The Main Tactics Used for Terror Attacks 3.3.5.2 Plane Hijacking 3.3.5.3 Chemical, Biological, Radiological, and Nuclear (CBRN) Terrorism 3.3.6 Regional Distribution 3.3.7 Domestic Versus Transnational Terrorism 3.3.8 Targets 3.3.9 Heterogeneity across Terror Organizations 3.3.9.1 Heterogeneity in Terms of Number of Attacks and Fatalities 3.3.9.2 Heterogeneity in Longevity 3.4 Terrorism in the Western and ``Organization of Economic Cooperation and Development (OECD)'' Countries 3.5 Terrorism in the USA: 1970 Onward 3.6 Take-Aways Appendix 3.A Regions Defined in GTD 3.B An Illustration of the GTI Calculation II Financing, Costs and Consequences of Terrorism 4 Cost of Organizing, and, Financing of Terror 4.1 Introduction 4.2 Estimated Cost of Terror Attacks 4.2.1 Individual Terror Attacks 4.2.2 Financing of Jihadi Terror Cells Targeting Western Europe 4.3 Financing of Terror Organizations 4.3.1 Dark Economy: Illegal Sources 4.3.2 Legal/Quasi-Legal Sources: The Gray Economy 4.3.3 Moving Funds 4.3.4 Richest Terrorist Organizations 4.3.5 Terror Financing as a Value Chain 4.4 Take-Aways 5 Economic Costs of Terrorism and Costs of Counter-Terrorism Measures 5.1 Introduction 5.2 Costs of Specific Attacks 5.2.1 9/11 Attacks 5.2.2 Madrid Commuter Train Bombing in 2004 5.3 Country-Wise and Global Cost of Terrorism 5.3.1 IEP's Methodology 5.3.2 Patterns and Trends 5.3.3 Cost of Terrorism vis-à-vis Cost of Violence and Conflict 5.4 Direct Cost of Counter-Terrorism (CT) Measures 5.4.1 Security Costs 5.4.2 Cost of Preemptive Strikes 5.4.3 War in Afghanistan 5.4.4 Aggregate Counter-Terrorism Spending by the USA since 9/11 5.4.5 Indirect Cost of Counter-Terrorism Measures 5.5 Are Such Large Spending on Security and Counter-Terrorism Rational? 5.6 Sum-Up and Take-Aways 6 Economic and Health Effects of Terrorism 6.1 Introduction 6.2 Real Per-Capita Income and Real GNP 6.2.1 Per-Capita Real Income of Individual Countries 6.2.1.1 Basque Country (Spain) 6.2.1.2 Israel 6.2.1.3 Turkey 6.2.2 Per-Capita Real Income Growth: Different Regions 6.2.2.1 Western Europe 6.2.2.2 Asia 6.2.3 Per-Capita Real Income Growth: World Economy 6.3 International Trade 6.4 Foreign Direct Investment (FDI) 6.5 Labor Markets 6.5.1 Target Economies 6.5.2 Source Economies 6.5.3 Discrimination in the Labor Market of Target and Potential Target Economies 6.5.3.1 9/11 Attacks and Discrimination in the US Labor Market 6.5.3.2 2005 London Attacks 6.5.3.3 Terror Attacks in Norway in 2011 6.6 Financial Markets 6.6.1 Single-Attack Studies 6.6.1.1 9/11 Attacks 6.6.1.2 Madrid and London Train Bombings, and Boston Marathon Bombing 6.6.1.3 Group of Selected Terror Attacks 6.6.2 Attacks in a Region/Country over an Interval of Time 6.6.3 Terrorism and Market Volatility 6.7 Tourism 6.8 Subjective Well-Being 6.8.1 9/11 Attacks 6.8.1.1 Impact on US Residents 6.8.1.2 The Impact on Residents in the UK 6.8.2 Madrid Bombings in 2004 and London Attacks in 2005 6.8.3 Boston Marathon Bombing in 2013 6.8.4 Terrorism in France and British Isle 6.8.5 Second Intifada: Israel 6.9 Physical Health Effects 6.9.1 9/11 Attacks and Cardiovascular Health 6.9.2 Stress-Induced Birth Outcomes 6.9.2.1 USA: 9/11 Attacks 6.9.2.2 Colombia 6.10 Role of Media 6.11 Behavioral Impact 6.11.1 Substituting Flying for Driving 6.11.2 Overcoming Fear 6.12 Take-Aways Appendix 6.A Individual Studies 6.A.1 Terrorism and International Trade 6.A.2 Terrorism and Foreign Direct Investment 6.A.3 9/11 Attacks and Financial Markets 6.A.4 Stock-Market Effects of Madrid and London Bombings and Boston Marathon Bombing 6.A.5 Terrorism and Tourism 6.B Compensating Surplus to Measure the Monetary Equivalence of the Effect of Terrorism on Life Satisfaction in Model of Frey-etal:09 III Behavior, Organization and Survival of Terror Groups 7 Behavior, Internal Organization, and Survival of Terror Groups 7.1 Introduction 7.2 Rivalry and Cooperation Among Terror Groups 7.2.1 Armed Rivalry 7.2.1.1 Examples of Inter-Field Rivalry 7.2.1.2 Example of Intra-Field Rivalry 7.2.2 Cooperation Among Terror Groups 7.3 Terrorist Networks 7.3.1 Basic Concepts of Network Theory 7.3.2 Random, Small-World, and Centralized or Scale-Free Networks 7.3.3 Examples of Terrorist Networks: 9/11 and Bali Attacks 7.4 Internal Organization and Agency Problems 7.4.1 The Principal-Agent Problem of Delegation and Agency Costs 7.4.2 Delegation and Agency Costs of Facing a Terror Organization 7.4.3 Two Sets of Problems 7.4.4 Control and Security Vulnerability 7.4.5 Twin Tradeoffs 7.4.6 Evidence on Preference Divergence and Control 7.4.6.1 PIRA versus UVF versus UDA in Ireland 7.4.6.2 Fatah Versus Hamas 7.4.7 Implications for Counter-Terrorism Actions 7.4.7.1 Specific Suggestions 7.5 Ending of Terrorist Organizations and the Determinants of Their Longevity 7.5.1 Types of Ending 7.5.2 Measuring the Life Span of Terror Organizations 7.5.3 Determinants of the Longevity of Terror Organizations 7.5.3.1 Group-Specific Factors 7.5.3.2 Interaction Among Terrorist Organizations 7.5.3.3 External Factors 7.6 Take-Aways Appendix 7.A Individual Studies on Survival of Terrorist Organizations IV Fighting the War on Terror: How Direct Counter-Terrorism Measures Work 8 Security 8.1 Introduction 8.2 Landes's Analysis of Plane Hijacking and Its Extensions 8.2.1 Theory 8.2.1.1 Sequence of Events, Probabilities, and Payoffs 8.2.1.2 Binary Decision 8.2.2 Empirical Analysis 8.2.2.1 Landes's Findings 8.2.2.2 Intervention Analysis a la Enders-etal:90a 8.2.2.3 General Significance 8.3 A Model of Attack-Defend: One Terror Organization and One Target (Defending) State 8.3.1 General-Damage, Terror-Damage, and Damage-Control Functions 8.3.2 Behavior of the Org 8.3.2.1 An Exogenous Increase in Terrorism or Militancy 8.3.2.2 An Increase in Security Measures 8.3.3 Behavior of the Defending State 8.3.3.1 Marginal (First-Order) Conditions 8.3.3.2 Comparative Statics 8.3.4 Nash Equilibrium 8.3.5 Increase in Terrorism and Response: A Comparative Statics 8.4 Many Target Countries 8.4.1 The Scenario and the Damage Functions 8.4.2 Rational Choice of Security 8.4.3 Best Response Functions, Nash Equilibrium, and a Comparative Statics 8.4.4 Cooperative Solution 8.5 Takeaways 9 Preemptive Strikes, Can We Win the War on Terror? 9.1 Introduction 9.2 Preemptive Measures in an Economic Model 9.2.1 Shift of the Marginal Cost Function of Producing Terror 9.2.2 Shift of the Intertemporal Budget Line 9.3 The Org's Choice of the Terror Input and the Impact of Preemption 9.3.1 The Static Model 9.3.2 The Dynamic Model 9.4 The State's Choice of Preemptive Measures: A Sequential Game 9.5 Can the State Win the War on Terror? 9.5.1 Constant Marginal Cost of Preemption 9.5.2 Increasing Marginal Cost of Preemption 9.6 Interdependence Among Target Countries 9.6.1 The Model 9.6.1.1 Damage-Deterrence and Cost Functions 9.6.1.2 Rational Choice of Preemptive Measures and Nash Equilibrium 9.6.1.3 Comparative Statics 9.6.1.4 Cooperation 9.7 Side Effects 9.7.1 Backlash 9.7.1.1 Greater Support for Terrorism 9.7.1.2 Preference Shift 9.7.1.3 Targeted Backlash Effect: A Third Aspect 9.7.1.4 Evidence on Backlash Effects 9.7.2 Negative Economic Externality 9.8 Take-Aways 10 Combating Financing of Terror 10.1 Introduction 10.2 Pre-9/11 Efforts to Check Terror Financing 10.3 Post-9/11 Efforts and Regulations 10.3.1 FATF 10.3.2 FATF-Like Regional Groups 10.3.3 The United Nations 10.3.3.1 Various Resolutions and Institutions within the U.N. 10.3.3.2 International Money Laundering Information Network (IMoLIN) 10.3.4 IMF and World Bank 10.3.5 Egmont Group 10.3.6 Measures by the USA 10.3.6.1 USA Patriot Act 10.3.6.2 Financial Technology Protection Act 10.3.6.3 Terror Finance Tracking Program (TFTP) 10.3.6.4 Bureau of International Narcotics and Law Enforcement Affairs (INL) 10.3.6.5 Bureau of Economic and Business Affairs 10.3.6.6 Bureau of Counter-Terrorism 10.3.6.7 Terrorist Financing Targeting Center (TFTC) 10.3.7 European Union 10.3.7.1 AML/CFT Directives 10.3.7.2 The EU-US Terrorist Finance Tracking Program (TFTP) and The European Terrorist Finance Tracking System (TFTS) 10.3.8 OECD's Handbook 10.3.9 Individual Country Initiatives 10.4 Take-Aways Appendix 10.A FATF's List of Recommendations 11 Security-Deterrence ``and'' Preemptive Measures 11.1 Introduction 11.2 Intelligence and Infiltration of Terrorist Networks 11.2.1 Expected Number of Compromised Nodes/Terrorists 11.2.2 Production Function of Terror 11.2.3 Damage from Terror: Benefit for the Org 11.2.4 Resource Costs and Rational Choice of Size and Density 11.2.5 Intelligence and Infiltration as Defensive Measures 11.2.6 Evidence on the Effect of Intelligence on Terror Attacks 11.3 Simultaneous Choice of Security-Deterrence and Preemptive Measures 11.3.1 Damage/Fear Function 11.3.2 Cost Functions and the Sequential Game 11.3.3 Org's Choice of Terror Production in Stage 2 11.3.4 State's Choice of CT Measures in Stage 1 11.4 Choosing Terror and Non-Terror Activities 11.4.1 Org's Preferences 11.4.2 Prices and the Budget Constraint Facing the Org, and The Counter-Terrorism Measures 11.4.3 A Review of Income, Substitution, and Price Effects 11.4.4 Effects of Counter-Terror Measures 11.5 Take-Aways 12 Hostage-Taking, Ransom, and Negotiations 12.1 Introduction 12.2 Counter-Terror Measures and Hostage-Taking: Theory 12.2.1 No Strategic Interaction 12.2.2 Strategic Interaction Between Terrorists and the Target Country 12.2.2.1 Negotiate or Not Negotiate 12.2.2.2 Logic of No-Concession Policy 12.3 Empirical Evidence 12.3.1 Direct Counter-Terror Measures and Major Policy Initiatives Impacting Skyjacking 12.3.2 Concessions to Hostage Takers 12.3.3 Is No-Concession Policy a Good Idea? 12.3.4 Logistic Success, Duration of Hostage-Holding, Negotiation Success, and Ransom Payments 12.3.5 Hostage Safety 12.3.6 Democracy and Hostage-Taking 12.4 Take-Aways Appendix 12.A Details of Atkinson-etal:87 12.B Details of Poe:88 12.C Details of Brandt-Sandler:09 12.D Details of Lee:13 V Addressing Fundamental Causes of Terrorism 13 Combining Preventive Measures with Preemptive Measures 13.1 Introduction 13.2 Analytical Environment 13.3 Solving the Model 13.3.1 The State's Decision Making in Period 2b 13.3.2 The Org's Decision in Period 2a 13.3.3 The State's Choice of CT Measures in Period 1 13.3.4 The State's Choice of Preemptive Measures Only 13.3.5 Grievance Redressal 13.4 Partial Redressal May Encourage the Terror Organization to Produce More Terror 13.5 Take-Aways 14 Religious Orthodoxy and Terrorism 14.1 Introduction 14.2 Religious Orthodoxy as Rational Behavior: Iannaccone's Model 14.2.1 Prohibitions Solving the Moral Hazard Problem of Low Participation 14.2.1.1 Prohibitions 14.2.1.2 Cooperative Behavior and Welfare 14.2.1.3 Approaching the Efficient Solution 14.2.2 Initial Sacrifices Solving the Adverse Selection Problem of Bad Composition 14.2.2.1 Heterogeneity in Preferences 14.2.2.2 Heterogeneity in Economic Opportunities 14.2.2.3 Overall Implication 14.3 Orthodoxy Leading to Violence and Terrorism 14.4 Economies of Scope and Joint Production of Religion and Violence 14.5 Take-Aways 15 Root, Breeding, and Propagative Causes of Terrorism 15.1 Introduction 15.2 Foreign Occupation and Suicide Terrorism 15.2.1 Evidence by Pape, and Pape and Feldman 15.2.1.1 Major Suicide-Attack-Afflicted Nations After 9/11 15.2.2 Policy of Off-Shore Balancing 15.2.3 Pape's Statistical Test 15.2.4 Subsequent Tests: Hardening Theory 15.3 Poverty, Unemployment, Economic Well-Being, and Education 15.3.1 Case Studies and Opinion Polls 15.3.1.1 Gus Emunim: An Israeli Jewish Underground Group 15.3.1.2 Nasra Hassan's Interview-Based Study of Palestinian Militants 15.3.1.3 Opinion Polls Among Palestinians by Palestinian Center for Policy and Survey Research (PCPSR) 15.3.1.4 Profiles of Palestinian Militants 15.3.1.5 Profiles of Hezbollah Militants 15.3.2 Regression-Based Studies 15.3.2.1 Non-Linear Relation 15.3.3 Unemployment, Transport Costs, and Recruitment 15.4 Political and Civil Rights 15.4.1 Inverse U-Shaped Relation Between Political/Civil Rights and Terrorism 15.5 Income Inequality and Domestic Terrorism 15.6 Minority Discrimination and Islamophobia 15.6.1 Minority Discrimination 15.6.2 Home-Grown Terrorism in the West 15.7 Pre-Existing Conflict 15.8 Globalization 15.9 Take-Aways Appendix 15.A Details of Collard-Wexler-etal:13 15.B Details of Lai:07, Enders-Hoover:12, Enders-etal:16, and Enders-etal:16 15.C Details of Gaibulloev-etal:17 15.D Details of Krieger-Meierrieks:19 15.E Details of Piazza:11 A General Appendix A: Theory A.1 Compensating Surplus A.2 Game Theory: Some Preliminaries A.2.1 Introduction A.2.2 Defining a Game and the Central Question A.3 Prisoner's Dilemma Game A.4 Dormitory Game: A Case of Negative Externality A.5 Firecrackers Contribution Game: A Case of Positive Externality A.6 Other Forms of Games: Sequential and Multi-Stage Games B General Appendix B: Statistics and Econometrics B.1 Correlation Coefficient B.2 Hypothesis Testing or Statistical Inference B.2.1 Two Tailed and One-Tailed Tests B.2.2 p-Value B.3 Basics of Regression B.3.1 Cross-Sectional, Time-Series, and Panel Data B.3.2 Simple ``Linear'' Regression B.3.2.1 Hypothesis Testing B.3.3 Multiple Regression B.4 Quantitative and Qualitative or Categorical Variables, and Introduction of Dummy Variable B.4.1 Qualitative Independent Variable B.4.2 Qualitative Dependent Variable: Logit, Probit, and Tobit B.5 Data Issues B.5.1 Proxy Variables B.5.2 Omitted Variables Bias and Control Variables B.5.3 Selection Bias B.6 Interaction Effect B.7 Interpreting Coefficients: Standardizing Changes in Variables in Terms of Standard Deviation B.8 Variables in (Natural) Log B.9 Non-Linearity B.10 Instrumental Variables B.10.1 Examples B.10.2 Way Out B.11 Maximum Likelihood Estimation (MLE) B.12 Basics of Simultaneous-Equations Estimation B.13 Basics of Time-Series Analysis B.13.1 Various Components of a Time-Series Data B.13.2 Intervention AnalysisSee, for example, [Chapter 5]Enders:15. B.13.2.1 Structural Macro Policy Changes B.13.2.2 A Traffic Example B.13.3 Granger Causality B.13.4 Vector Auto Regression (VAR) Analysis B.14 Panel-Data Analysis B.15 Seemingly Unrelated Regression (SUR) B.16 Event Study Analysis B.17 Regression Discontinuity Design (RDD) and Difference-in-Differences (DiD) Approach B.17.1 RRD B.17.2 DiD B.18 Moderated Median Analysis B.19 Count data, Poisson and negative Binomial Regression, Poisson Autoregression Models B.20 Extreme Bounds Analysis B.21 Survival Models B.22 STaR (STAR) Estimation B.23 Gravity Equation in International Trade References Index This textbook presents a systematic study of terrorism from the standpoint of economic analysis. Choosing the kind and level of measures to counter terror is, to a large extent, an economic decision, as counterterrorism (CT) measures and their side effects are costly. This text, contains theoretical models that illustrate the economic mechanisms of different types of CT measures. A vast array of empirical studies and regularities are also presented. Some chapters discuss in depth the empirical results in the literature as well as the underlying statistical/econometric methodologies that go beyond ordinary regression. General Appendix A provides an exposition of the concept of compensating surplus and elements of the basic game theory, to help the reader with an economics background recapitulate micro theory concepts used in the book. General Appendix B lays out the notions of hypothesis testing, regression and more advanced statistical/econometric methods, so that the reader understands or at least can have an intuitive idea of how the results are derived and what they mean with some degree of inner comfort. Aimed at students at the intermediate undergraduate and graduate levels, the text requires knowledge of basic micro, first-order conditions of profit or utility maximization and cost minimization, and statistical concepts of hypothesis testing and regression. This textbook is intended for use in courses in economics, political science, criminal justice, and emergency management. Additionally, professionals working with national security in government and non-governmental organizations may find it useful. .