The Lexus and the Olive Branch: Globalization, Democratization and Terrorism

Abstract

This paper provides an original study into how democratization and globalization influence terrorism - examining the motives of terrorists and how democratic institutions and international integration influence non-state economic actors. We employ a gravity model to investigate the relative importance of globalization and democratization on transnational terrorism. We construct an original database of over 200,000 observations from 1968-2003 for 179 countries, to examine the extent to which economic, political and historical factors influence the likelihood of citizens from one country to engage in terrorist activities against another. We find that the advent of democratic institutions, high income and more openness in a source country significantly reduces terrorism. However, the advent of these same positive developments in targeted countries actually increases terrorism. Ceteris paribus, the impact of being a democracy or participating in the WTO for a source country decreases the number of transnational terrorist strikes by about 2 to 3 per year, which is more than two standard deviations greater than the average number of strikes between any two countries in a given year.

Keywords: Growth, Conflict, Terrorism

JEL Classification: E6, H1, H5, D74, O11