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Terrorism Networks and Trade: Does the Neighor Hurt?

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Author Info

  • José de Sousa
  • Daniel Mirza
  • Thierry Verdier

Abstract

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.

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Bibliographic Info

Paper provided by CEPII research center in its series Working Papers with number 2010-04.

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Date of creation: Mar 2010
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Handle: RePEc:cii:cepidt:2010-04

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Keywords: Terrorism; Trade; Security;

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References

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  1. Anderson, James E. & Marcouiller, S.J. Douglas, 1997. "Trade and Security, I: Anarchy," Working Paper Series, Research Institute of Industrial Economics 477, Research Institute of Industrial Economics.
  2. Robert C. Feenstra & John Romalis & Peter K. Schott, 2002. "U.S. Imports, Exports, and Tariff Data, 1989-2001," NBER Working Papers 9387, National Bureau of Economic Research, Inc.
  3. Mirza, Daniel & Verdier, Thierry, 2008. "International trade, security and transnational terrorism: Theory and a survey of empirics," Journal of Comparative Economics, Elsevier, vol. 36(2), pages 179-194, June.
  4. S. Brock Blomberg & Gregory D. Hess, 2004. "How Much Does Violence Tax Trade?," CESifo Working Paper Series 1222, CESifo Group Munich.
  5. James E. Anderson & Yoto V. Yotov, 2010. "The Changing Incidence of Geography," American Economic Review, American Economic Association, American Economic Association, vol. 100(5), pages 2157-86, December.
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Cited by:
  1. Randall K. Filer & Dragana Stanisic, 2013. "The Effect of Terrorist Incidents on Capital Flows," CERGE-EI Working Papers wp480, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  2. Nathalie Colombier & David Masclet & Daniel Mirza & Claude Montmarquette, 2009. "Global Security Policies Against Terrorism and the Free Riding Problem: An Experimental Approach," CIRANO Working Papers, CIRANO 2009s-44, CIRANO.

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