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Terrorism From Within: An Economic Model of Terrorism

  • S. Brock Blomberg

    (Wellesley College)

  • Gregory D. Hess

    (Claremont McKenna College)

  • Akila Weerapana

    (Wellesley College)

In this paper, we develop and explore the implications of an economic model that links the incidence of terrorism in a country to the economic circumstances facing that country. We briefly sketch out a theory, in the spirit of Tornell (1998), that describes terrorist activities as being initiated by groups that are unhappy with the current economic status quo, yet unable to bring about drastic political and institutional changes that can improve their situation. Such groups with limited access to opportunity may find it rational to engage in terrorist activities. The result is then a pattern of reduced economic activity and increased terrorism. In contrast, an alternative environment can emerge where access to economic resources is more abundant and terrorism is reduced. Our empirical results are consistent with the theory. We find that for democratic, high income countries, economic contractions (i.e. recessions) can provide the spark for increased probabilities of terrorist activities.

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Paper provided by Claremont Colleges in its series Claremont Colleges Working Papers with number 2002-14.

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Date of creation: Aug 2002
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Handle: RePEc:clm:clmeco:2002-14
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  1. Lapan, Harvey E. & Sandler, Todd, 1988. "To Bargain or Not to Bargain: That is the Question," Staff General Research Papers 10817, Iowa State University, Department of Economics.
  2. Todd Sandler & H�vard Hegre, 2002. "Economic analysis of civil wars," Defence and Peace Economics, Taylor & Francis Journals, vol. 13(6), pages 429-433.
  3. Aaron Tornell, 1998. "Reform from Within," Harvard Institute of Economic Research Working Papers 1827, Harvard - Institute of Economic Research.
  4. Enders, Walter & Sandler, Todd & Parise, Gerald F, 1992. "An Econometric Analysis of the Impact of Terrorism on Tourism," Kyklos, Wiley Blackwell, vol. 45(4), pages 531-54.
  5. Grossman, Herschel I, 1991. "A General Equilibrium Model of Insurrections," American Economic Review, American Economic Association, vol. 81(4), pages 912-21, September.
  6. Lapan, Harvey E. & Sandler, Todd, 1993. "Terrorism and signalling," European Journal of Political Economy, Elsevier, vol. 9(3), pages 383-397, August.
  7. Hess, Gregory D & Orphanides, Athanasios, 1995. "War Politics: An Economic, Rational-Voter Framework," American Economic Review, American Economic Association, vol. 85(4), pages 828-46, September.
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