IDEAS home Printed from
   My bibliography  Save this article

Terrorism and the Economics of Trust


  • S Brock Blomberg

    () (Claremont McKenna College)

  • Gregory D Hess

    (Claremont McKenna College)

  • Daniel YJ Tan

    (Pomona College)


Previous research has shown that trust is an important component that encourages investment and capital formation which, in turn, enhances economic performance. This article investigates the effect of terrorism on income, including its indirect role through lowering trust. We consider terrorism as a factor that can increase the cost of investing in technology and capital formation due to its ability to diminish trust in an economy. We then develop a novel and rich dataset spanning 179 countries from 1968 to 2007 using associated community, social, cultural, political, and economic factors from the World Values Survey and international terrorism incidence data from ITERATE. Using empirical tests, we first show that terrorism has a negative and statistically significant impact on individual income. This impact is larger than what has previously been found, possibly due to aggregation effects and data selection. We then estimate the societal impact of terrorism on economic growth by examining the extent to which terrorism taxes trust and how this, in turn, hinders economic performance. Consequently, we develop a measure of the economic consequences of terrorism through sizing the magnitude of the ‘trust tax’ from terrorism. We find that the trust tax is relatively minor compared to the direct impact of terrorism on income.

Suggested Citation

  • S Brock Blomberg & Gregory D Hess & Daniel YJ Tan, 2011. "Terrorism and the Economics of Trust," Journal of Peace Research, Peace Research Institute Oslo, vol. 48(3), pages 383-398, May.
  • Handle: RePEc:sae:joupea:v:48:y:2011:i:3:p:383-398

    Download full text from publisher

    File URL:
    Download Restriction: no


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:eee:phsmap:v:482:y:2017:i:c:p:74-86 is not listed on IDEAS
    2. Paschalis Arvanitidis & Athina Economou & Christos Kollias, 2016. "Terrorism’s effects on social capital in European countries," Public Choice, Springer, vol. 169(3), pages 231-250, December.

    More about this item


    growth; political economy; terrorism;


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:joupea:v:48:y:2011:i:3:p:383-398. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.