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FDI and the Geography of Terror

Author

Listed:
  • Omer Majeed

  • Günther G. Schulze

    (Department of International Economic Policy, University of Freiburg)

Abstract

This study uncovers a powerful, yet overlooked geographic dimension to ter rorism’s macroeconomic impact. Our findings reveal that terror’s harm to FDI is profoundly shaped by attack location. Using Pakistan as a case study we show that assaults on economic and political centers cause far greater damage to FDI than attacks in peripheral areas. From 2001–2021, terrorism cost Pakistan $8.1 billion in lost FDI, eroding nearly 30% of its foreign capital stock. These results carry broad relevance, highlighting how localized violence can generate systemic, uneven macroeconomic consequences, which supports geographically calibrated policy responses to terror.

Suggested Citation

  • Omer Majeed & Günther G. Schulze, 2025. "FDI and the Geography of Terror," Discussion Paper Series 53 JEL Classification: F2, Department of International Economic Policy, University of Freiburg, revised Dec 2025.
    • Handle: RePEc:fre:wpaper:53
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    File URL: https://www.iep.uni-freiburg.de/discussion-papers/repec/fre/wpaper/files/DP53_FDI_and_the_Geography_of_Terror.pdf
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