Terrorism and Local Economic Development

34 Pages Posted: 10 Jun 2024

See all articles by Marco Faravelli

Marco Faravelli

The University of Queensland

Sundar Ponnusamy

Monash University


We study the local economic effects of terror incidents at a sub-national level for a global set of developed and developing countries. Using night lights as a proxy for local economic activity, we identify that one additional fatality per attack results in a drop of 0.23 percent in economic development, on average. The detrimental effects are observed for up to three years following the attack. Areas that are within a 50-kilometer radius of the incident location are affected. The attacks targeted at the police/military bases have the most detrimental effects. The group of countries from the Middle-Eastern and Northern African region, South Asia, and Sub-Saharan African regions suffer the most. Using individual-level data from four countries as a case study, we show that terrorism affects individual well-being and lowers the desire to have additional children among women. Findings survive a battery of robustness tests.

Keywords: Terrorism, Economic Development, Spatial Analysis

Suggested Citation

Faravelli, Marco and Ponnusamy, Sundar, Terrorism and Local Economic Development. Available at SSRN: https://ssrn.com/abstract=4860131 or http://dx.doi.org/10.2139/ssrn.4860131

Marco Faravelli (Contact Author)

The University of Queensland ( email )


Sundar Ponnusamy

Monash University ( email )

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