Are lives a substitute for livelihoods ? Terrorism, security, and U.S. bilateral imports

Daniel Mirza and Thierry Verdier

No 4094, Policy Research Working Paper Series from The World Bank

Abstract: What is the impact of terrorism on trade through higher security at the borders? The authors set up a theory which shows that the impact goes not only from terrorism to trade. Higher trade with a partner might, in turn, increase the probability of terrorism acts and make security measures more costly for total welfare. To identify the true impact of terrorism, their theory allows for a strategy to condition out the latter mechanism. The authors show in particular how past incidents perpetrated in third countries (anywhere in the world except the origin or targeted country) constitute good exogenous factors for current security measures at the borders. Their tests suggest that terrorist incidents have a small effect on U.S. imports on average, but a much higher effect for those origin countries at the top of the distribution of incidents. In addition, the level of the impact is up to three times higher when the acts result ina relatively high number of victims, the products are sensitive to shipping time, and the size of the partner is small. The authors further show how terrorism affects the number of business visas given by the United States, thereby affecting significantly U.S. imports in differentiated products. These results suggest that security to prevent terrorism does matter for trade.

Keywords: International Terrorism&Counterterrorism; Transport Security; Economic Theory&Research; Country Strategy&Performance; Free Trade (search for similar items in EconPapers)
Date: 2006-12-01
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Are Lives a Substitute for Livelihoods? Terrorism, Security, and US Bilateral Imports (2014)
Working Paper: Are Lives a Substitute for Livelihoods? Terrorism, Security, and US Bilateral Imports (2014)
Working Paper: Are Lives a Substitute for Livelihoods? Terrorism, Security, and US Bilateral Imports (2014)
Working Paper: Are lives a substitute for livelihoods ? Terrorism, security and U.S. bilateral imports (2009)
Working Paper: Are Lives a Substitute for Livelihoods? Terrorism, Security and US Bilateral Imports (2007)
Working Paper: Are lives a substitute for livelihoods ? Terrorism, security and U.S. bilateral imports (2007)
Working Paper: Are lives a substitute to livelihoods ? Terrorism, security and US bilateral imports (2006)
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