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N° 2010-04 |
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| March 2010 |
| Terrorism Networks and Trade: Does the Neighor Hurt? |
José de Sousa
Daniel Mirza
Thierry Verdier |
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| We study the impact of transnational terrorism diffusion on security and trade. We set a simple theoretical
model predicting that the closer a country 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 from 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. |
Non-technical summary  |
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Résumé
non-technique
en français |
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| Full text |
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| Terrorism; trade; security |
Keywords |
| F12; F13 |
JEL classification |
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