Authors' note: The authors thank Jim Breckenridge, Ethan Bueno de Mesquita, James Fearon, Jeanne Giraldo, Harold Trinkunas, the participants in the CISAC Social Science Seminar, and several anonymous reviewers for tremendously helpful comments and criticisms. All errors are our own.
Underfunding in Terrorist Organizations
Article first published online: 29 JUN 2007
International Studies Quarterly
Volume 51, Issue 2, pages 405–429, June 2007
How to Cite
SHAPIRO, J. N. and SIEGEL, D. A. (2007), Underfunding in Terrorist Organizations. International Studies Quarterly, 51: 405–429. doi: 10.1111/j.1468-2478.2007.00457.x
- Issue published online: 29 JUN 2007
- Article first published online: 29 JUN 2007
A review of international terrorist activity reveals a pattern of financially strapped operatives working for organizations that seem to have plenty of money. To explain this observation, and to examine when restricting terrorists' funds will reduce their lethality, we model a hierarchical terror organization in which leaders delegate financial and logistical tasks to middlemen, but cannot perfectly monitor them for security reasons. These middlemen do not always share their leaders' interests: the temptation exists to skim funds from financial transactions. When middlemen are sufficiently greedy and organizations suffer from sufficiently strong budget constraints, leaders will not fund attacks because the costs of skimming are too great. Using general functional forms, we find important nonlinearities in terrorists' responses to government counter-terrorism. Restricting terrorists' funds may be ineffective until a critical threshold is reached, at which point cooperation within terrorist organizations begins to break down and further government actions have a disproportionately large impact.