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Terrorism Networks and Trade: Does the Neighbor Hurt?

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  • de Sousa, José
  • Mirza, Daniel
  • Verdier, Thierry

Abstract

In this paper, we study the impact of transnational terrorism diffusion on security and trade. We set up a simple theoretical model predicting that the closer a country is 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 rom 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.

Suggested Citation

  • de Sousa, José & Mirza, Daniel & Verdier, Thierry, 2010. "Terrorism Networks and Trade: Does the Neighbor Hurt?," CEPR Discussion Papers 7946, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7946
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    References listed on IDEAS

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    1. James E. Anderson & Yoto V. Yotov, 2010. "The Changing Incidence of Geography," American Economic Review, American Economic Association, vol. 100(5), pages 2157-2186, December.
    2. Anderson, James E. & Marcouiller, S.J. Douglas, 1997. "Trade and Security, I: Anarchy," Working Paper Series 477, Research Institute of Industrial Economics.
    3. S. Brock Blomberg & Gregory D. Hess, 2006. "How Much Does Violence Tax Trade?," The Review of Economics and Statistics, MIT Press, vol. 88(4), pages 599-612, November.
    4. 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.
    5. repec:cup:apsrev:v:77:y:1983:i:01:p:36-54_24 is not listed on IDEAS
    6. 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.
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    Cited by:

    1. Nathalie Colombier & David Masclet & Daniel Mirza & Claude Montmarquette, 2011. "Global Security Policies against Terrorism and the Free Riding Problem: An Experimental Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 13(5), pages 755-790, October.
    2. Peter Egger & Martin Gassebner, 2015. "International terrorism as a trade impediment?," Oxford Economic Papers, Oxford University Press, vol. 67(1), pages 42-62.

    More about this item

    Keywords

    security; Terrorism; trade;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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