Transnational terrorism, US military aid, and the incentive to misrepresent

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DOI: 10.1177/0022343310394472

2011 48: 303 originally published online 8 April 2011Journal of Peace ResearchNavin A Bapat

Transnational terrorism, US military aid, and the incentive to misrepresent

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Transnational terrorism, US military aid,and the incentive to misrepresent

Navin A Bapat

University of North Carolina Chapel Hill

Abstract

This study proposes a strategic explanation for the USAs continued provision of military aid to host states with problemsof terrorism, despite its poor empirical record. Using a game theoretic model, I demonstrate that US military aid creates a

moral hazard problem. If host states are provided with the tools to pacify their territory only if terrorist campaigns areongoing,but will lose this aid once theproblem of terrorism ceases, host states have little incentive to acceleratethe demiseof terrorist groups. However, the model demonstrates that while military aid does not accomplish the US goal of disarm-ing terrorists, military aid is effective at preventing hoststates from negotiating with terrorist organizations. The provisionof military aid provides a disincentive for host states to reach a negotiated settlement with terrorist groups, and thereforeprevents terrorist organizations from altering the status quo that is favorable to the USA. This suggests that while militaryaid may not be effective at actually disarming terrorist groups, it can be effective at keeping terrorist groups out of power.Thesehypotheses are tested using the Jones & Libicki (2008) data on terrorism from 1997 to 2006. The empirical resultssupport the conclusions of the theoretical model.

Keywords

conflict, military aid, terrorism

Shortly after the Obama Administration assumed officein 2008, the Interagency Policy Group recommendedan increase in military aid to Pakistan to bolster its fightagainst militant groups.1 The goal of the aid was to givethe Pakistani government the tools it needed to disarmAl-Qaeda and Taliban fighters that were responsible forcontinuing attacks in Afghanistan. This policy follows alarger consensus that military aid to host states fromwhich transnational terrorists operate is a valuable toolin accomplishing the US goal of fighting terrorism

(Carothers, 2003; Walt, 2001). However, several studiesexamining the link between foreign aid and terrorismcast considerable doubt on these conclusions (Azam &Delacroix, 2006; Berrebi, 2003; Kruegar & Maleckova,2003; Stotsky, 2008). While numerous studies arguethat military aid is simply ineffective, others argue that

military aid is actually counter-productive. These conclu-sions raise the question: why, despite theoretical andempirical evidence, do policymakers continue to empha-size the importance of military aid as an instrument ofcounter-terrorism?

This study proposes an explanation for the USAscontinued provision of military aid to host states withproblems of terrorism, despite its poor empirical record.Using a game theoretic model, I demonstrate that USmilitary aid creates a moral hazard problem. If hosts are

provided with the tools to pacify their territory only ifterrorist campaigns are ongoing, but will lose this aidonce the problem of terrorism ceases, hosts have littleincentive to accelerate the demise of terrorist groups.Instead, hosts have incentives to play up the threat ofterrorism and demand US military support to keep ter-rorists at bay. However, the model demonstrates thatwhile military aid does not accomplish the US goal of

1 Council on Foreign Relations. March 2009. White Paper of theInteragency Policy Groups Report on US Policy towardAfghanistan and Pakistan (http://www.whitehouse.gov/assets/documents/Afghanistan-Pakistan_White_Paper.pdf).

Corresponding author:[email protected]

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disarming terrorists, military aid provides a disincentivefor hosts to negotiate with terrorists. This suggests thatwhile US military aid is unlikely to shorten terroristcampaigns, military aid can be seen as a useful antiterror-ist instrument that prevents the groups from altering thestatus quo that is favorable to the USA.

I develop this argument in four steps. First, I outlinethe literature on foreign aid. Second, I discuss these find-ings as they relate to the question of how military aidaffects the behavior of both hosts and terrorist groups.Third, I develop and solve a game theoretic model ofUS support for hosts facing transnational terrorists, andderive two testable hypotheses regarding the effect ofmilitary aid on terrorist campaigns. I next test thesehypotheses by combining data on US disbursements ofmilitary aid from the US Overseas Loans and Grants,Obligations and Loan Authorizations Greenbook with

Jones & Libickis (2008) data on terrorist campaigns.I then discuss the empirical results and conclude witha general discussion of how the USA uses military aid notnecessarily to defeat terrorists, but rather to prevent hostsfrom accommodating terrorists.

Military aid as an instrument of counter-terrorism

According to the US Greenbook, military aid consists ofeither loans or grants that are intended to purchase USweapons, direct military transfers, or training of the

military personnel of the recipient country.2 From theperiod from 1946 to 2008, the US Greenbook identifiesseveral types of aid granted to states under this program,including counter-narcotics assistance provided toColombia and the provision of helicopters to Pakistansmilitary. Several policymakers in the United States arguethat this type of military aid can be effective in inducingstates to adhere to US foreign policy objectives (Alesina& Dollar, 2000; Palmer & Morgan, 2006). In exchangefor military equipment or training, the USA couldrequire recipient states to liberalize or support US foreign

policy (Cingranelli & Pasquarello, 1985; Meernick,Krueger & Poe, 1998). A classic example of this is themilitary aid provided to both Egypt and Israel inexchange for their compliance with the Camp DavidPeace Accords. In exchange for making peace, both stateswere promised billions of dollars in military aid.These accords led several policymakers and scholars to

argue that the use of foreign aid could be an effectivesubstitute for costlier change-seeking policies, such asmilitary force.

Although the stated goal of US military aid is oftenbenign, several studies demonstrate that aid typicallyproduces adverse consequences. Numerous studies argue

that assistance from abroad creates a disincentive forstates to pursue sound economic policy (Schudel,2008; Svensson, 2000). Other studies demonstrate thatforeign aid seems to decrease democratic development(Bueno de Mesquita & Smith, 2007; Cingranelli &Pasquarello, 1985). Additionally, a third consequencefrequently identified by scholars of alliance politics is thatmilitary aid can create moral hazard (Lake, 1999).Recipient states can use their newfound capability frommilitary aid to become more aggressive in their foreignpolicy, which may include making greater demands of

their rivals. These empirical studies suggest that regimeswhich receive military aid appear to become less demo-cratic, more prone to repression, and more belligerenttoward their neighbors. It is easy to point to the behaviorof anti-Communist recipient countries during the ColdWar, which often possessed some of the worst humanrights records as defined by both Freedom House andAmnesty International (Cingranelli & Pasquarello,1985; McCormick & Mitchell, 1988; Poe, 1990).3

Applying these insights to the problem of transna-tional terrorism, we might expect that military aid mayminimize terrorism, but might also exacerbate the condi-tions that led to the formation of terrorist groups in thefirst place. For example, several empirical studies demon-strate that countries with poor state capacity, heavycorruption, and low per capita GDP scores are likelyto experience violent insurgencies (Fearon & Laitin,2003; Hegre & Sambanis, 2004). These studies suggestthat military aid increases the corruption of hosts andcreates disincentives for hosts to invest in their popula-tion, which in turn may negatively affect economicgrowth. Similarly, since we see an inverse relationshipbetween democratic development and military aid, one

might conclude that military aid stifles democratization.Additionally, numerous studies examining foreign aidmore generally argue that external assistance worsens theproblem of terrorism. Although foreign aid is intendedto alleviate poverty, which is considered a cause ofterrorism, studies at the individual level indicate that

2 USAID Economic Analysis and Data Services (2010) US OverseasLoans and Grants, Obligations and Loan Authorizations Greenbook(http://gbk.eads.usaidallnet.gov/).

3 See Freedom Houses publication Freedom in the World 19782010; Amnesty Internationals annual State of the Worlds HumanRights19622010.

304 journal of PEACE RESEARCH 48(3)



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terrorists tend to be drawn from relatively wealthierindividuals (Kruegar & Maleckova, 2003). Therefore,foreign aid may create an increased number of wealthiercitizens while stifling democratic development, whichmay actually increase terrorist recruiting.

These observations raise the question: why do

policymakers continue to use military aid if there is suchan abundance of evidence that it is unlikely to reduce theproblem of terrorism? One possibility may be that scho-lars have a relatively narrow definition of what constitu-tes success against terrorism. Typically, scholars view apolicy as a successful antiterrorist instrument if it reducesthe number of terrorist attacks, decreases the number ofgroups that are operational, or contributes to the collapseof a group (Azam & Thelen, 2010; Bandyopadhyay,Sandler & Younas, 2009). While these are certainly rea-sonable metrics, it is possible that an additional goal of

military aid is simply to prevent terrorists from accom-plishing their objectives. For example, military aid maynot be successful in preventing terrorists from engagingin attacks, but may be successful in preventing a govern-ment from pursuing conciliatory policies toward thesegroups. Military aid might also increase the length oftime that terrorists must fight in order to accomplishtheir strategic objectives. Since most groups collapsequickly, this increase in duration may make it impossiblefor terrorists to accomplish their goals (Bapat, 2005;Cronin, 2009; Jones & Libicki, 2008). If we thereforeexpand our definition of success so that it is not limitedto just a reduction in terrorist attacks, we may see thatmilitary aid gives hosts the power to both resist thedemands of terrorists and endure the cost of conflict.

To illustrate with an example, consider the case of theUS/Yemeni relationship. In 2000, Al-Qaeda launchedan attack against the USS Cole. This attack, while notparticularly crippling, demonstrated that Al-Qaeda wasbecoming increasingly brazen in its activities. Inresponse, the USA increased its military support for theYemeni government.4 If we examine the effect of thispolicy after ten years, the fact that Al-Qaeda still appears

to be operational within Yemen might lead to theconclusion that the military aid provided to the Yemenigovernment was a failure. However, if we consider thatYemen is not a particularly strong state, whereasAl-Qaeda and its affiliates continue to be a relativelystronger group, an alternative policy for Yemen mighthave been to negotiate a deal with Al-Qaeda in which

it allowed the group to conduct anti-American attacksfrom its territory. However, with US military support,Yemen continues to profess its support for US policyobjectives. In this case, even though Al-Qaeda has notbeen disarmed, one might consider the fact that Yemenremained loyal to the USA as a policy success.

These arguments raise the question: can military aidproduce success in terms of (1) preventing hosts fromdeviating from US policy objectives, and (2) disarmingoperational terrorists. In the following section, I formallymodel the US decision to support various hosts fromwhich transnational terrorists operate. The model devel-ops specific hypotheses as to how military aid affects theprospects for US success against terrorists.

Model

Figure 1 presents a stylized model of a transnational,anti-American terrorist campaign that occurs in a foreignhost. The conflict is simplified to three players: the USgovernment US, the host H, and the terrorists T thatoperate within Hs territory.5 H begins the game incomplete control of his territory, which allows him todistribute the territorys benefits to only his supporters.Additionally,Hs control of the territory provides someforeign policy benefit toUS, perhaps in the form of tradebenefits or a military alliance. On the other hand,Tseeks to destabilizeHs government and assume sover-

eignty over the territory for itself, which would allow it toreviseHs foreign policy such that it no longer providesthis benefit to theUS:We can therefore normalizeHsutility function such that H receives a payoff of 1 foreach round in which H survives, and a payoff of 0 ifHis destabilized byT:Similarly, assume thatTs utilityfunction is normalized such that Treceives a payoff of0 for each round in whichHsurvives, and receives a pay-off of 1 ifHdestabilizes. In addition to facing oppositionfromH; T also faces opposition fromUS, which seeksto minimize Ts control over the territory. Since USbenefits from keepingHin power, the primary objectiveofUSis to keep Tout of power.6

4 US Aid 20102012 Yemen Country Strategy (http://pdf.usaid.gov/pdf_docs/PDACP572.pdf).

5 I refer to USas she,Has he, and Tas it.6 A case example of this situation might be the USA/Saudirelationship. The host (the Saudi monarchy) is in control of itsterritory and distributes the benefits of ruling largely to members ofthe monarchy. In response, Al-Qaeda and other terrorists organizedto destabilize the regime. Since keeping the monarchy in power ben-efits the United States, American foreign policy seems oriented tokeeping Al-Qaeda out of power.

Bapat 305



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The game presented in Figure 1 represents a singleround of an infinitely repeated game, which continuesuntil one of three outcomes occurs. First, the game

ends if both H and T engage in a direct militaryencounter that destabilizesHand causes him to fall frompower. Substantively, the direct military encounteroccurs ifH engages in an offensive against T, or ifTattempts to seize power atHs center. However, ifT isdefeated following either an offensive or an attempt toseize power at the center, the game terminates with HdisarmingTand emerging victorious. A third possibilityis that both H and T reach a negotiated settlement inwhich H accommodates the demands of T. In doingso,Hre-orients his foreign policy away from US:If any

of these three outcomes (Tsuccessfully destabilizesHatthe center,HdisarmsT, orHand Treach a settlement)occurs, the game terminates.

Assume that in each round, H survives a directmilitary encounter withT with probabilityplt 2 0; 1and destabilizes in such an encounter with probability

1 plt; wheretrepresents the number of rounds pre-viously played and l2 0; L represents a normalizingparameter. This function specifies an assumptionthat Hs probability of survival decreases over time,though the rate of decline slows as l!Land acceleratesas l!0: The assumption that Hs ability to survivedeclines with time is based on several studies that con-clude that terrorists strengthen as the organization

H

US

AcceptReject

10

Offer Aid x

T Negotiate Offensive

Defensive

pt/(1-x)+((1-pt)/(1-x))(-a) - x ;

pt/(1-x) - cH - ;1-(pt/(1-x)) - cT)

T

Attack

Center1 - x;

1;0

pt/(1-x) +((1-pt)/(1-x))(-a) - x ;

pt/(1-x) - cH;

1- (pt/(1-x)) - cT

~Attack

Center

US

pt+

(1-pt)(-a);

pt- cH;

1 - pt- cT

Sustain Aid T

~Attack

CenterAttack

Center

- - x;pt/(1-x);

1- (pt/(1-x))

T

~Sustain Aid

pt/(1-x)+

((1-pt)/(1-x))(-a) - x;

pt/(1-x) - cH-;1- (pt/(1-x)) - cT

-a;

pt/(1-x);

1-(pt/(1-x))

Attack

Center

~Attack

Center

pt/(1-x) +((1-pt)/(1-x))(-a) - x ;

p

t

/(1-x) - cH

;1- (pt/(1-x)) - cT

Figure 1. Model of US military support for hosts facing terrorist campaigns

Payoffs are listed (US; H; T)




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persists over time (Bapat, 2005; Cronin, 2009; Jones &Libicki, 2008).

MovesEach round begins withUSs decision on whether or notto provide military aid to H to improve his chances ofsurvivingTs attempts at destabilization. US assistanceis formally represented byx2 0; 1, which is assumedto be a continuous and increasing level of assistance to Hsregime. USprovides increasing military aid as x!1;and relatively less as x!0: This aid directly increasesHs probability of survival to

plt

1x, where plt

1x>p so longas x>0: This indicates that if x 1 plt, USeffectively guarantees Hs survival in armed conflictagainst T.7 On the other hand, ifUS sets x0; Hs

probability of survival is simply equal to

plt

10plt

:Wetherefore see thatUSs aid increases the probability thatHwill survive destabilization, but it is theoretically pos-sible forH to survive withoutUSs support.

OnceUSallocates military aid toH,Hhas three pos-sible options. First,Hmay use the military aid providedbyUSto mount an offensive against T in an effort todisarm it. In this case, H actively attempts to destroyTs organization. Second, Hcan choose to stay on thedefensive against T and simply wait forT to make anattempt to seize power at the center. If H adopts thedefensive posture, the game next moves to T, which

decides whether or not to attack H at his center.IfTattacks atHs center,HdisarmsTwith probabilityplt

1x and T destabilizes H with probability 1 plt

1x:On the other hand, ifTdoes not challenge the center,the game moves to the next round, given that neitherH norT is disarmed.

The final option forH is to negotiate with T in aneffort to induce the group to cease its violence.Numerous studies in the bargaining and conflict litera-ture indicate that negotiated settlements which reflectthe balance of military power should be preferable to

conflict (Fearon, 1995; Wagner, 2000). Therefore,Tmight prefer some negotiated settlement ifH makessome offer that reflects the balance of military powerbetween the two sides. With USs military assistance,H could engage in coercive bargaining by threateningto mount an offensive ifTdoes not accept an offer of

1 plt1x , which reflects Ts probability of surviving amilitary encounter, given that US is supporting H:8

We can see that as x!1, indicating greater supportfromUS, the value ofHs offer toTdeclines. This indi-cates that H does not make an offer that reflects the

actual balance of power between himself and T, butrather the balance of power created by USs militaryassistance. The only case in whichHmakes an offer thatdoes reflect the actual balance of power is ifx0, inwhich case,Hoffers 1 plt101 plt:

OnceHmakes the offer,Teither accepts or rejects it.IfTrejects the offer,Hengages in an offensive againstTin an attempt to disarm the group. On the other hand,ifT accepts, T agrees to cease its political violence inexchange forHs concessions, which movesHpoliticallyaway from US: US then decides whether or not to

sustain military aid toHor whether to cut aid, given thatHmakes concessions to Tthat are unfavorable to US:FollowingUSs decision of whether or not to continueprovidingHwith military aid,Tdecides whether or notto abide by the terms of its agreement with H, orwhether to defect on the deal and attackHat his center.Should T resume fighting, H survives with probability

plt ifUSdoes not sustain aid, and survives with prob-

ability plt

1x ifUSsustains her military aid.

PayoffsHreceives a payoff of 1 for each round in which he bothsurvives as the sole sovereign over the territory andmakes no concessions toT. IfHnegotiates withT, andTterminates its violence,Hs payoff reflects the negoti-ated distribution of benefits. ShouldHmake an offer of

1 plt1x toT, and shouldTaccept,Hs payoff would beplt

1x:IfHrefuses to negotiate and engages in an offensiveagainst T, Hs payoff is equal to his probability ofdisarmingTminus the costcH2 0; 1he must pay toengage in military conflict, and an additional cost

r2 0; 1 that H must pay to arm his forces for anoffensive.9 Hs payoff for the offensive is therefore equalto

plt

1x1 1 plt

1x0 cH plt

1x cH r: IfHadopts defensive tactics, and Tresponds by attacking

7 Since plt

1xis a probability that must be bounded between [0,1], theoffer x 1 plt represents an upper limit since if x 1 plt,plt

1x1.

8 An alternative modeling strategy would be to endogenize the offermade byHto T. Doing so, however, makes the analytical solutionmore complex without affecting the empirical implications.9 I assume that there is a cost ci2 0; 1 for alli2 H; T should theplayers engage in conflict (Fearon, 1995). This cost represents theutility toifor the cost of conflict.

Bapat 307



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at the center, Hreceives a payoff of plt

1x cHsince thisoutcome also involves a military conflict againstT:However, sinceHdoes not have to arm his forces foran offensive againstT,Hdoes not payr if he adopts adefensive posture. IfTchooses not to attackHs center,

Hreceives a payoff of 1 and pays no cost, since there isno direct military conflict with T:Although bothH andUSderive utility from keeping

Tout of power, the utility functions of these players areslightly different. While Hs primary objective is tomaintain power over the territory, USdoes not deriveutility from keepingHin power, but rather from keep-ing Tout of power. Let us therefore specify that USreceives a payoff of 1 if and only if T is kept out ofpower. On the other hand, let us assume that ifTis ableto achieve any political gains within Hs territory, theUSpayoff reduces to 0, and USpays some political cost

a2 0;A:This indicates that if the results of the conflictbetweenH andTend up being favorable to T,USwillsuffer some political punishment for failing to preventT from achieving some power over the territory.10

Let us therefore assume that ifT gains political power,either by destabilizingHor by negotiating with H, thepayoff to theUSis equal to a:Let us further representthe cost to US for supplyingHwith military aid as x:If conflict occurs betweenHandT,USs utility for sup-portingHcan therefore be represented by the following

expression: plt

1

x

1

1

plt

1

x

a

x: On the

other hand, ifUSprovides aid toH, but there is no con-flict, the US payoff is equal to 1 x: Finally, ifH negotiates with T, and T fulfills the terms of theagreement, theUSpayoff reduces toa, since H andTalter the status quo from USs preferred position.

Let us now considerTs payoffs. T receives a payoffof 0 in each round ifHsurvives, and receives a payoffof 1 i f H destabilizes. If a negotiated settlement isreached, Ts payoff corresponds to the offer thatHmakes. LikeHandUS,Tis also assumed to pay a costcT2 0; 1if it fights, which represents the utility of thecost of conflict toT:However, since terrorist groups aretypically non-transparent and have incentives to misre-present their true resolve, let us assume that bothUSandH have incomplete information as to the value of cT,whereas T has complete and perfect information(Fearon, 1995; Powell, 2002). This ability to

misrepresent is often characteristic of terrorist groups,which frequently engage in behaviors intended to signalintense resolve, such as suicide bombings (Arce &Sandler, 2007; Bloom, 2005; Kydd & Walter, 2006;Lapan & Sandler, 1993). Let us therefore assume that USand Hare uncertain as to the value ofcT, but are both

aware that cT* U[0,1], or distributed according to astandard uniform distribution ranging between 0 and 1.

Solution

Since the game is repeated infinitely and involves incom-plete information, I solve the game using the MarkovPerfect Bayesian Solution concept (MPBE). StationaryMPBEassume that in any subgame, the behavior of eachof the players is dependent on only the current value of aparticular state variable (Mailath & Samuelson, 2006;Maskin & Tirole, 2001). Let us characterizepas the statevariable, or the current likelihood that Hwill survive adirect military encounter with T: This makes intuitivesense, as we would expect US, H, and T to base theirdecisions on Hs immediate probabilities of surviving.I therefore characterize the solution by the stationaryMPBE. The solution can be divided into three categoriesbased onHs behavior.

Case 1. Host negotiatesx1 plt1x

Let us first identify the set of conditions under which Hchooses to negotiate. In this case, Ts final decision ofwhether or not to attack the center is contingent onwhether or notUSsupportsH after negotiation. IfUSsustains her military aid toH,Tattacks atHs center iff

1 plt1x cT >1 plt

1x: We see that due to the costlynature of conflict, this expression can never be true, evenifx0:We can therefore see that ifUSsustains aid toH following negotiation, T will never renege on theagreement and attack the center. On the other hand,ifUScuts her military aid to H, T attacks Hs center

if 1 plt cT >1 plt

1x:Rearranging terms, this indi-

cates that T is indifferent between maintaining theagreement and attacking at the center

if cT plt

1xplt; which simplifies to pltx

1x: We cantherefore state that T will play Attack Center

ifcT < pltx1xand will *Attack CenterifcT p

ltx1x:Define

Hs belief that Twill attack at the center as c0T p

ltx1x:

We can see thatx!1 asc0T! 1; which demonstratesthatTis more likely to attack the center as the level ofaid thatUS provides increases. Substantively, this indi-cates that the greater the level of military aid provided

10 Substantively, an example of this might be if the political price theObama Administration would pay if the Talibans attempts todestabilize Hamid Karzais government were successful.




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byUS, the more likely it is that T will defect from anegotiated settlement, assuming US cuts her aid inresponse to the negotiated settlement. However, notice

that ifx0, the offer made byH is equal to 1 plt:If this is true, the probability thatTdefects is equal toplt0

100:In other words, ifHmakes an offer that reflectsthe balance of power between H and T without USsmilitary support,Tcan be considered perfectly credible.This reflects something interesting: the more aid USprovides, the less credible any deal is with T, whereasT is perfectly credible if US provides no military aid to H:

Intuition would tell us that since US can deterTsattack at Hs center with certainty if she continuesmilitary aid,USwould simply maintain its military aidif H negotiates. However, since USs utility is solelybased on keepingTout of power, USreceives a payoffof

a ifH negotiates with T. Therefore, the payoff to

USfor continuing military aid to H following negotia-tion with T is equal toa x: On the other hand, ifUS cuts her aid to H, conflict erupts between H and

Twith probabilitypltx1x:UStherefore sustains military aid

toH after negotiation if:

a x> pltx

1 x

plt 1 1 plt a

1 pltx

1 x

a:1

This expression simplifies to:

x1 x >p2lt1 a: 2

Since both x2 0; 1, this condition cannot befulfilled. This indicates that if H negotiates withT, US cannot credibly continue providing military aid toH: Both H and T know that US will revoke her aidif a negotiated settlement is reached. This establishesthat if H negotiates, H is aware that US will ceaseits military aid, and T will play Attack Center with

probabilityc0T:

Given that both players are aware of this, how doH and Tbehave in negotiation? Interestingly enough,the model demonstrates that both T for which

cT < pltx1x and T for which cT p

ltx1x always accept

Hs offer to negotiate. In the latter case,Twill not attackHs center at the end of the game, even ifUSrevokes hermilitary aid. This T therefore accepts any deal if

1 plt1x1 plt

1x cT, which must always be true.In the former case, where T will attack Hs centeronce US revokes her aid, T accepts if

1 plt cT 1 plt

1x cT. Again, this condition isalways fulfilled, which indicates that these Twill acceptand subsequently playAttack Center so long as x>0:If x0; these T accept and abide by the negotiatedsettlement. Therefore, H knows that if he plays

Negotiate, T will always Accept and US will always*Sustain Aid. Since H is unaware of what type ofThe is facing,Hs payoff for negotiation can be defined as:

pltx

1 xplt cH 1 p

ltx

1 x

1: 3

We therefore see that negotiation is a risky strategy forH:His aware that making an offer toTguarantees thatit will loseUSs military aid, since US is only interestedin keeping T out of power. Negotiation thereforerequires H to gamble that T is of the type for which

cT pltx

1x:However, if the probability that Nature drawsthis type is equal to 1 pltx1x

, we see that it is increas-

ingly unlikely as x!1: In other words, if H isheavily relianton USmilitary aid, it is unlikely that nego-tiation will succeed, and highly likely thatTwill respondtoUSs revoking of aid by re-igniting terrorist violence.

Case 2. Host plays defensiveIf H adopts defensive tactics, H does not mount anoffensive against T; but instead gambles that T will

be deterred by USs provision of military aid andits subsequent increase in military power. Tchooses to

attack if 1 plt1x cT >0: Re-arranging terms,

T attacks if cT 0,Hs strategy of adopting the defensive posture dominatesHs strategy of negotiation.

Lemma 1. H strictly prefers to playDefensiveoverNegotiateifx>0:

Proof.See appendix.11

11 The appendix is located online at http://www.prio.no/jpr/datasetsand http://www.unc.edu/~bapat/JPRAPPENDIX3.30.2011.pdf

Bapat 309



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If, on the other hand, USsetsx0,HplaysDefensiveoverNegotiateif

1 plt

1 0

plt

1 0 cH

plt

1 0 1 >plt0

1 0 plt

cH 1 p

lt0

1 0

1;

which simplifies to 1 pltplt cH plt >plt:This expression is true ifplt >cH, meaning that withoutmilitary aid, only hosts that are likely to resist destabili-zation will refuse to negotiate, whereas weaker hosts willaccommodate terrorists into their governments.

Corollary 1. Ifx

0,HprefersDefensiveiffplt >cH

and prefersNegotiateotherwise.Proof.See appendix.

This yields an interesting insight as to the effect of mil-itary aid on Hs behavior. If plt is relatively high,Hrefuses to negotiate with T, despite the lack ofUSmil-

itary aid. However, if plt


10/17

H would negotiate, producing a payoff toUSofa:Ifwe compare this outcome to any case in which USprovides military aid, we see that US strictly prefers

aiding H if plt 0; which produces a payoff to US of

1

plt

plt 1 plt a plt: Simplifying, we see that1 pltplt 1 plta plt >aif:

plt2 plt1 a > 0: 5

Since plt 2 0; 1; this statement is always true. Onthe other hand, ifUSsetsx1 plt, which is its max-imum value, USpayoff simplifies to plt: Since it also

must be true thatplt >a; we see that for all possiblevalues ofx,USprefers settingx>0 ifHwill negotiate.Substantively, this indicates that if H threatens to

negotiate with T, USwill always respond with a levelof military aid to effectively bribe H from reaching anegotiated settlement. We can identify the level of aidUSprovides by maximizing her utility for military aid

1 plt1x

plt

1x1 1 plt

1x

a

pltx1x

1 xwith respect to x:

q

1 plt

1x

plt

1x1 1 plt

1x

a

plt1x

1 x

qx0 6

Using this expression, we can identifyx, or the value

ofx that maximizes USutility:x 1

1818 123

13plt1 a

9p2lt1 a ffiffiffi3p ffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi8 27plt 8ap 1 a13 63139p2lt1 a ffiffiffi3p

ffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi8 27plt 8a

q 1 a13 7

Although the analytical solution is difficult to inter-pret, Figure 2 graphically present some of the propertiesofx: First, we know that x has a maximum value of1 plt:12 Ifx1 plt,Tis perfectly deterred fromchallenging H at the center if H plays Defensive.The probability that T plays Attack Center is equal

to 1 plt

11plt 0: This indicates that ifx >1 plt,US setsx1 plt:Substantively, if thelevel of military aid that maximizesUSutility exceeds themaximum allowable level ofUSmilitary aid,USsimplysets the level of military aid to the maximum allowablelevel. From Figure 2, we see that over time, the levelof military aid that maximizes USutility monotonicallyincreases. By playingDefensive, H allows T to survive,

which enables the group to improve its internal organiza-tion, ties to the population, and general ability to survive.If this is true, andHbecomes less able to forcibly disarmT,USwill be required to pay an increasing level of mil-itary aid to deterTfrom directly challenging the center.As an example, we can consider the increasing burden pre-sently placed on the USA in Afghanistan. While HamidKarzais government was seemingly at its peak in terms oflegitimacy and international support following the top-pling of the Taliban, since that time it has steadily declinedin power relative to the group. This requires an increasingburden on the USA to protect Kabul from a Taliban offen-

sive. This pattern is visible in the optimum level of militaryaidx identified by the model.

Ifplt >cH,H is sufficiently likely to resist destabili-zation such that he will not negotiate withT, even if hedoes not receive military aid. In these cases, US canessentially free ride off the efforts ofH, sinceHdoes notthreaten to negotiate with T. However, in cases wherea!1, it is possible that USwill provide military aideven ifH plays Defensive. While the full discussion isreserved for the appendix, consider where the USprovides

the maximum level of aid x1 plt. In these cases,we see thatUSprefers to provide military aid if

plt >1 pltplt1 1 plta plt:

Simplifying, we see that this expression is true if

a >plt

1 plt: Substantively, this result suggests that evenin cases whereHwill refuse to negotiate withT,USwillsupplyHwith military aid if the political punishmentassociated with Hs destabilization is significantly high.Although this is valuable to H in that it keeps him in

.2

.4

.6

.8

1

1 2 3 4 5 6 7 8

Terrorist campaign years (t)

Level of US military aid (x)

p=.2, =.5, =1 p=.2, =.8, =1p=.6, =.5, =1

Figure 2. Level of US military aid provided as a function oftimet

12 Assume that ifx*>1plt,x1plt.

Bapat 311



11/17

power, there is an interesting consequence toUSmilitary

aid. Without military aid, T for which cT


12/17


13/17

The second hypothesis focuses on the political cost tothe USA associated with a particular hosts destabiliza-tion. To test this hypothesis, I develop a measure of affi-nity between the USA and a particular host using

information from the US State Departments VotingPractices in the United Nations.19 This publication liststhe percentage of times that each state in the systemvoted in the same manner as the USA on votes in theUN General Assembly. The correlation between UNvotes is often used as a proxy for political affinity(Gartzke, 2000). I therefore assume that if a state main-tains a close affinity with the USA, as represented by apercentage of votes supported by the USA in the UNGeneral Assembly, the cost to the USA for this statesdestabilization increases. Therefore, we would predictthat since higher scores indicate greater affinity with theUSA, the USA is less likely to terminate military aid,thereby increasing the duration of time until a group col-lapses. I take the natural log of the UN Voting variable tonormalize its distribution. My expectation is that like theaid variables, the affinity variable will have a negativecoefficient, meaning that increases in affinity with theUSA decrease the hazard of Terrorist collapse. The meanlogged UN similarity score is equal to 1.34, with a stan-dard deviation of .75, a min of 2.88 and a max of .04.

Although the sample is smaller, I include three addi-tional control variables in the model. First, I include the

hosts logged per capita GDP score for the first year of theterrorist campaign. Several studies associate higher percapita GDP scores with a more powerful and developedcentral government,which decreases the ability of militantsto operate (Fearon & Laitin, 2003). This variable thereforecontrols for the hosts ability to suppress its terrorists with-out help from the USA. Second, I include the logged pop-ulation score for the host in the first year of the terrorist

campaign as a second control variable. This variable is alsoincluded as an ancillary parameter in the tests that do notusethe instrument. Third, I includethe hosts logged num-ber of military personnel in the firstyear of thecampaign tocontrol for the militarization of the host. Finally, in themodels that do not use the instrumental variable, I include

the hosts Freedom House score. Each of these variables isintended to hold the baseline conditions that favor terror-ism constant in order to focus on the effect of military aidon the duration of the campaign.

MethodI test the hypotheses using three Weibull models(Box-Steffensmeier & Zorn, 2002). To mitigate endo-geneity, the third model runs the analysis using the instru-mental variable (Bijwaard, 2008; Olsen & Farkas, 1988).The statistical models therefore include the military aid

variables as ancillary parameters that affect the shape ofthe hazard rate. My expectation is that the coefficientsof the aid variables will be negative, suggesting that eachof them decreases the hazard that the terrorist group willcollapse. Hypothesis 2, on the other hand, predicts a pro-portional decrease in the probability that a group isdefeated, given the cost to the USA for abandoning a par-ticular host. Therefore, the US Affinity variable is treatedonly as a variable that proportionately affects the hazardrate, rather than the shape of the hazard rate.20 The expec-tation here is also that the US Affinity variable will have anegative coefficient that proportionately decreases theprobability that a group collapses.

Results

The first column in Table II presents the results usingthe dichotomous military aid variable, the secondcolumn presents the results using the logged military aidexpenditure variable, and the third presents the instru-mental variable results. In each test, the military aid vari-ables each have negative and statistically significantcoefficients, which indicates that increases in each of the

military aid indicators significantly increase the length oftime until a terrorist group collapses. We further see thatthe instrumental variable is both negative and signif-icant at the .01 level. This is important given the like-lihood that the duration of a campaign may influencethe provision of military aid. The correlation between the

Table I. Estimates of US military aid using host Freedom

House scores and host logged population

US military aid (probit)

Variable b(s.e.)

Host Freedom House score .81 (.27)**Ln population .25 (.14)*Constant 3.22 (2.4)N 184Log likelihood 105.15Pr.>chi2 .01

*p < .1, **p< .05, ***p< .01.

19 Available at http://www.state.gov/p/io/rls/rpt/.

20As a robustness check, each analysis was re-run using the Cox spe-cification instead of the Weibull model with ancillary parameters.The results remain consistent. A table with the Cox results is pre-sented in the appendix.




14/17

error term and the instrument is .04 with a significancelevel of .56. This demonstrates that the instrument isuncorrelated with the error term.

Figure 3 plots the predicted hazard rates both with noUS military aid and with military aid using thedichotomous military aid variable and the instrumentalvariable. We see that without military aid, the probabilitythat terrorists collapse increases throughout the course ofthecampaign and reachesits highest pointby Year 8. How-ever, with US military aid, the probability that terrorists

collapse both proportionately drops and decreases through-out thecourseof thecampaign. These results are consistentwith the prediction of Hypothesis 1: if the USA providesmilitary aid, then there will be a decrease in the probabilitythat the terrorist campaign will terminate. This supportsthe models contention that providing military aid to hostsmakes the business of fighting terrorists quite profitable.Without military aid, the predicted hazard of terrorist col-lapse steadily increases over time. Although this result isinconsistent with the theoretical models assumption thatthe hazard of terrorist collapse declines monotonically with

time, recall that the theoretical model predicts that if theUSA were to provide no military aid, the campaign wouldtypically end in the first year with a negotiated settlement if

plt cH, the

model predicted resolute terrorists may attack the host atits center if and only if the USA did not provide military

aid. In these cases, sinceplt is relatively higher, the model

predicts that the most resolute terrorist groups wereindeed likely to collapse quickly following their attackson the hosts center. The results support these predic-tions, and also suggest that US policymakers are quiteeffective in determining where to allocate military aid.The results suggest that US policymakers do not grantmilitary aid in cases where hosts are capable of suppres-sing their terrorists, and do provide aid when hosts havemore difficulty in suppressing terrorists. This result isconsistent with the theoretical model. Additionally, ifwe re-test the results using non-parametric Cox models,the results are consistent with both Hypothesis 1 and the

theoretical assumption of a declining hazard of terroristcollapse. These results from the Cox models are pre-sented in the appendix.21 We can therefore concludethat the results are consistent with both Hypothesis 1and the theoretical models empirical implications.

Table II. The effect of US military aid on the duration until host government disarms terrorist groups

Dichotomous Logged Instrument

Variable b(s.e.) b(s.e.) b(s.e.)

Weibull

Ln US Affinity .73 (.31)** 1.4 (.47)*** .66 (.32)**Ln per capita GDP .28 (.22) .48 (.43) .24(.21)Ln Population .41 (.2)** 1.23 (.36)*** .48 (.17)***Ln Armed force .71 (.27)*** 1.71 (.4)*** .73 (.24)***Constant 7.03 (4.02) 1.27 (7.2) 5.6 (3.2)

AncillaryMilitary aid .78 (.32)** .29 (.12)** 1.3 (.48)***Ln per capita GDP .25 (.07)*** .26 (.17) .15 (.06)***Host Freedom House .35 (.14)** .17 (.17) Ln Population .08 (.12) .08 (.12) Constant 3.5 (2.2) 7.8 (4) 1.96 (.65)N 174 103 174Log likelihood 156.16 60.12 164.79Pr.>chi

2

.02 .00 .01*p < .1, **p< .05, ***p< .01.

Table III. Predicted effects of US military aid and increasing

US affinity on terrorist campaign duration

Years until terrorist group is disarmed

Variable Baseline 1 sd %changeUS Aid (instrument) 4.72 7.52 59%US Affinity 7.52 13.73

83%

21 Please see the table marked Supplement 1, located with theappendix at http://www.prio.no/jpr/datasets and http://www.unc.edu/~bapat/JPRAPPENDIX3.30.2011.pdf

Bapat 315



15/17

If we use the instrumental variable model to comparethe mean duration until a group collapses, we see thatwhen the instrument is equal to .39, signifying no mili-tary aid, the predicted duration until a group collapses is4.69 years. However, when the instrument is increasedto its mean of .61, indicating that the USA is providing

military assistance, the predicted duration increases to7.82 years, which is a 67% increase. We therefore seethat consistent with Hypothesis 1, US military aid seemsto prolong the existence of terrorists, which can beexplained by the lucrative nature of having an active ter-rorist campaign in the post 9/11 era.

The results further support Hypothesis 2. Again, wesee that each of the coefficients on the US Affinity vari-able are both negative and significant across each of themodels, including the one using the instrumental vari-able. Figure 4 captures the effect of increasing US Affi-

nity on the hazard of group collapse. We see thatincreasing affinity proportionately decreases the prob-ability that a terrorist group is defeated. In the modelwith the instrumental variable, the mean duration untila terrorist group collapses if the USA provides militaryaid is 7.82 years. A one standard deviation increase in thehosts US Affinity score increases this duration to 13.38years, which is a 71% increase. This demonstrates thatterrorist campaigns in hosts that are relatively moresupportive of the USA tend to take longer to terminate.This supports the theoretical models prediction that

increasing the costs to the USA for terrorists enteringinto the hosts government makes the business ofcounter-terrorism lucrative and gives hosts no incentiveto terminate their terrorist threats. The increase in thehosts military power may deter terrorists from challen-ging and achieving power at the center, but paradoxi-

cally, allows terrorists to survive for longer durations.

Conclusion

The model and empirical test demonstrate that militaryaid prolongs terrorist campaigns largely because thepromise of such aid can make the business of fighting ter-rorism profitable. However, the model demonstrates thatthe USA is not completely foolish in continuing to pro-vide military aid despite this set of incentives. The modeldemonstrates that without military aid, hosts would

likely negotiate with terrorists in order to reach an effi-cient, peaceful solution to their disputes. If the issue indispute is related to US strategic interests, such a negoti-ated settlement would likely involve change that is unfa-vorable to the USA. However, if the USA providesmilitary aid to the host, the gains from military aid givethe host no incentive to accommodate the terrorists, andmay keep the host loyal to the USA. Therefore, if weevaluate the effectiveness of military aid, we can see thatwhile it is ineffective in that it prolongs campaigns bygiving hosts disincentives to disarm their terrorists, it is

0

.05

.1

.15

.2

.25

0

.05

.1

.15

.2

.25

Terroristcollapsehazard

1 2 3 4 5 6 7 8Duration of terrorist campaign

No military aid Military aid No military aid Military aid

US aid (dichotomous)

1 2 3 4 5 6 7 8Duration of terrorist campaign

US aid (instrument)

Figure 3. Effect of military aid on the number of years until group collapse




16/17

effective at preventing terrorists from altering a hostsforeign policy. In that sense, military aid can be effectiveat accomplishing US objectives.

Replication data

Datafor replication areavailableat www.prio.no/jpr/datasets.

Acknowledgements

I would like to thank Todd Sandler, Andrea Lopez, EdKaplan, Shyam Sunder, the participants in the 2010 Ter-rorism and Policy Conference at the University of Texasat Dallas, the members of the 2010 Daniel Rose YaleUniversityTechnion Initiative, and three anonymousreviewers for their very helpful comments. All remainingerrors remain my responsibility. This work was

supported by the National Science Foundation(SES-1000328).

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NAVIN BAPAT, b. 1977, PhD in political science(Rice University, 2004); Assistant Professor at theUniversity of North Carolina Chapel Hill specializingin the study of transnational insurgency, terrorism,

international conflict, and economic sanctions. Hiscurrent research focuses on alliances among militantgroups, the spread of internal violence to internationalwars, and the growth of violent insurgent movements.

http://jpr.sagepub.com/

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