From (No) Butter to Guns? Understanding the Economic Role in Transnational Terrorism

Abstract

This paper provides a comprehensive study into the economic determinants of transnational terrorism and the role that development plays in fostering a more peaceful world. We analyze models of conflict resolution to investigate the relative importance of economic development on domestic and transnational terrorism. We construct an original database from 1968-2003 for 179 countries in order to examine which economic factors influence the propensity to be affected by transnational terrorist activities. We also compare these results to a sub-sample from 1998-2003 on domestic terrorism. We find that economic development is associated with higher incidents of transnational terrorism, especially in higher income countries. However, when considering lower income countries, economic progress is actually negatively related to transnational terrorism.

Keywords: Growth, Conflict, Terrorism

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