Terrorism Networks and Trade: Does the Neighbor Hurt?

Thierry Verdier, José De Sousa () and Daniel Mirza

No 7946, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In this paper, we study the impact of transnational terrorism diffusion on security and trade. We set up a simple theoretical model predicting that the closer a country is to a source of terrorism, the higher the negative spillovers on its trade. The idea is that security measures, which impede trade, are directed both against the source country of terror and its neighbor countries where terrorism may diffuse. In contrast, we demonstrate that countries located far rom terror could benefit from an increase in security by trading more. Taken to the test, we empirically document these predictions. We find (1) a direct negative impact of transnational terrorism on trade; (2) an indirect negative impact emanating from terrorism of neighbor countries; and (3) that trade is increasing with remoteness to terror. These results are robust to various definitions of the neighboring relationships among countries.

Keywords: Security; Terrorism; Trade (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2010-08
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Terrorism Networks and Trade: Does the Neighor Hurt? (2010)
Working Paper: Terrorism Networks and Trade: Does the Neighbor Hurt? (2010)
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