Terror networks and trade: Does the neighbor hurt?

José De Sousa (), Daniel Mirza and Thierry Verdier

European Economic Review, 2018, vol. 107, issue C, 27-56

Abstract: This paper studies how network-related terrorism redistributes trade flows across countries, including those countries that are not a direct source of terror. We first develop a game theoretical framework with imperfect information on the spatial location of transnational terrorism to show how the resulting security measures produce a non-monotonic effect on the distribution of trade across countries. Neighbors adjacent to terror, even when they do not source it, have trade reduced through enhanced security measures, while countries farther away benefit from those security measures. Second, to empirically assess the distortional effects of terrorism on trade, we first estimate the structural gravity equation derived from our theory. Then, armed with the estimates of the partial effect of neighbor terror on bilateral trade, we perform a counterfactual experiment and confirm the non-monotonic general equilibrium effect of neighbor terror on trade.

Keywords: Terrorism; Trade; Security (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292118300734
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Terror networks and trade: Does the neighbor hurt? (2018)
Working Paper: Terror networks and trade: Does the neighbor hurt? (2018)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:107:y:2018:i:c:p:27-56

DOI: 10.1016/j.euroecorev.2018.05.001

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().