Abstract
A terrorist group, based in a developing (host) country, draws unskilled and skilled labor from the productive sector to conduct attacks in that nation and abroad. The host nation chooses proactive countermeasures. Moreover, a targeted developed nation decides its optimal mix of immigration quotas and defensive counterterrorism actions. Even though proactive measures in the host country may not curb terrorism directed at it, it may still be advantageous in terms of national income. Increases in the unskilled immigration quota augment terrorism against the developed country. By contrast, increases in the skilled immigration quota can reduce terrorism in the developed country if skilled migrants have a small marginal impact on terrorism there. When the developed country assumes a leadership role, it strategically should reduce its skilled immigration quota to induce more proactive measures in the host developing country.
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