We perform an empirical investigation of the macroeconomic consequences of international terrorism and interactions with alternative forms of collective violence. Our analysis is based on a rich unbalanced panal data set with annual observations on 177 countries from 1968 to 2000, which brings together information from the Penn World Table dataset, the ITERATE dataset for terroist events, and dataset of external and internal conflict. We explore these data with cross-sectional and panal groth regression analysis and a structural VAR model. We find that, on average, the incidence of terrorism may have an economically significant negative effect on growth, albeit one that is considerably smaller and less persistant that that associated with either external wars or internal conflict. As well, terrorism is associated with a redirection or economic activity away from investment spending and towards government spending. However, our investigation also suggests important differences both regardng the incidence and the economic consequences of terrorism among different sets of countries. In OECD economies, in particular, terrorist incidents are considerably more frequent than in other nations, but the negative influence of these incidents on growth is smaller.
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Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number
100.
Length: 47 pages Date of creation: Jan 2004 Date of revision: Handle: RePEc:eab:macroe:100
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Find related papers by JEL classification: E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook H1 - Public Economics - - Structure and Scope of Government H5 - Public Economics - - National Government Expenditures and Related Policies D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Gregory D. Hess & Athanasios Orphanides, 2001.
"War and Democracy,"
Journal of Political Economy,
University of Chicago Press, vol. 109(4), pages 776-810, August.
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