International Terrorism, International Trade, and Borders

Michele Fratianni and Heejoon Kang

No 2006-13, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: This paper shows that terrorism reduces bilateral trade flows, in real terms, by raising trading costs and hardening borders. Countries sharing a common land border and suffering from terrorism trade much less than neighboring or distant countries that are free of terrorism. The impact of terrorism on bilateral trade declines as distance between trading partners increases. This result suggests that terrorism redirects some trade from close to more distant countries. Our findings are robust in the presence of a variety of other calamities such as natural disasters or financial crises.

Keywords: financial crisis; natural disaster; trade gravity model; transaction cost (search for similar items in EconPapers)
JEL-codes: C33 F02 F13 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:iuk:wpaper:2006-13

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