A Theoretical Examination of the Effect of Anti-national Activities on National Income

Abstract

Terrorism and anti-national activities reduce the capital stock of a country, increase levels of uncertainty, and promote counterterrorism expenditures by drawing resources from productive sectors. This chapter analyzes the issue of anti-national activities using a static general equilibrium framework. Anti-nationals appropriate or destroy a part of the existing capital stock. Governments hold preventive or regulatory sectors that monitor and provide security service to reduce such socially deviant activities and, thereby, to prevent misutilization of capital. Incorporating these issues, a general equilibrium model has been developed to examine the impact of a government’s stringent regulatory policies and the expansion of a country’s capital base on the volume of the anti-national sector and its consequent impact on national income as well. The study finds that, contrary to common wisdom, stringent governmental regulatory policies expand the prevalence of anti-national activities and may produce negative impact on national income. Accumulation of capital stock, however, is found to produce a positive impact on the volume of the anti-national sector and national income. Hence, the solution to this problem does not lie in stricter governmental regulation but rather in a conducive environment for capital accumulation. Such a scenario needs to be created.

Citation

Banerjee, D. (2019), "A Theoretical Examination of the Effect of Anti-national Activities on National Income", Das, R.C. (Ed.) The Impact of Global Terrorism on Economic and Political Development, Emerald Publishing Limited, Leeds, pp. 35-48. https://doi.org/10.1108/978-1-78769-919-920191005