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International Terrorism, International Trade, and Borders

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Author Info
Michele Fratianni (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
Heejoon Kang (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

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Abstract

This paper shows that terrorism reduces bilateral trade flows, in real terms, by raising trading costs and hardening borders. Countries sharing a common land border and suffering from terrorism trade much less than neighboring or distant countries that are free of terrorism. The impact of terrorism on bilateral trade declines as distance between trading partners increases. This result suggests that terrorism redirects some trade from close to more distant countries. Our findings are robust in the presence of a variety of other calamities such as natural disasters or financial crises.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2006-13-fratianni-kang.pdf
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Publisher Info
Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2006-13.

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Date of creation: 2006
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Handle: RePEc:iuk:wpaper:2006-13

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Related research
Keywords: financial crisis; natural disaster; trade gravity model; transaction cost;

Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data

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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.:
  1. Atkinson, Scott E & Sandler, Todd & Tschirhart, John, 1987. "Terrorism in a Bargaining Framework," Journal of Law & Economics, University of Chicago Press, vol. 30(1), pages 1-21, April.
  2. Andrew K. Rose, 2000. "One money, one market: the effect of common currencies on trade," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 7-46, 04. [Downloadable!] (restricted)
  3. Eckstein, Zvi & Tsiddon, Daniel, 2004. "Macroeconomic consequences of terror: theory and the case of Israel," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 971-1002, July. [Downloadable!] (restricted)
    Other versions:
  4. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. Michael Bordo & Barry Eichengreen & Daniela Klingebiel & Maria Soledad Martinez-Peria, 2001. "Is the crisis problem growing more severe?," Economic Policy, CEPR, CES, MSH, vol. 16(32), pages 51-82, 04. [Downloadable!] (restricted)
  6. Cauley, Jon & Im, Eric Iksoon, 1988. "Intervention Policy Analysis of Skyjackings and Other Terrorist Incidents," American Economic Review, American Economic Association, vol. 78(2), pages 27-31, May. [Downloadable!] (restricted)
  7. Blomberg, S. Brock & Hess, Gregory D. & Orphanides, Athanasios, 2004. "The macroeconomic consequences of terrorism," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1007-1032, July. [Downloadable!] (restricted)
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  8. Tavares, Jose, 2004. "The open society assesses its enemies: shocks, disasters and terrorist attacks," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1039-1070, July. [Downloadable!] (restricted)
  9. Auffret, Philippe, 2003. "High consumption volatility : the impact of natural disasters?," Policy Research Working Paper Series 2962, The World Bank. [Downloadable!]
  10. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March. [Downloadable!]
  12. Sandler, Todd & Enders, Walter, 2004. "An economic perspective on transnational terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 301-316, June. [Downloadable!] (restricted)
  13. Enders, Walter & Sandler, Todd & Parise, Gerald F, 1992. "An Econometric Analysis of the Impact of Terrorism on Tourism," Kyklos, Blackwell Publishing, vol. 45(4), pages 531-54.
  14. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December. [Downloadable!] (restricted)
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  15. Mark Skidmore & Hideki Toya, 2002. "Do Natural Disasters Promote Long-Run Growth?," Economic Inquiry, Oxford University Press, vol. 40(4), pages 664-687, October.
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Cited by:
(explanations, 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.)

  1. Mirza, Daniel & Verdier, Thierry, 2007. "Are Lives a Substitute for Livelihoods? Terrorism, Security and US Bilateral Imports," CEPR Discussion Papers 6173, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
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