Terrorism Networks and Trade: Does the Neighor Hurt?
AbstractWe 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.
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Bibliographic InfoPaper provided by CEPII research center in its series Working Papers with number 2010-04.
Date of creation: Mar 2010
Date of revision:
Terrorism; Trade; Security;
Other versions of this item:
- De Sousa, José & Mirza, Daniel & Verdier, Thierry, 2010. "Terrorism Networks and Trade: Does the Neighbor Hurt?," CEPREMAP Working Papers (Docweb) 1017, CEPREMAP.
- de Sousa, José & Mirza, Daniel & Verdier, Thierry, 2010. "Terrorism Networks and Trade: Does the Neighbor Hurt?," CEPR Discussion Papers 7946, C.E.P.R. Discussion Papers.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
This paper has been announced in the following NEP Reports:
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- Randall Filer & Dragana Stanišic, 2012. "The Effect of Terrorist Incidents on Capital Flows," CESifo Working Paper Series 3998, CESifo Group Munich.
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