Abstract
This article presents a theoretical framework and some empirical results showing that the level of foreign aid received reduces the supply of terrorist attacks from recipient countries, while U.S. military interventions are liable to increase this supply. 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, and use military interventions more sparingly.
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