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International Terrorism, International Trade, and Borders

Author

Listed:
  • 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)

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.

Suggested Citation

  • Michele Fratianni & Heejoon Kang, 2006. "International Terrorism, International Trade, and Borders," Working Papers 2006-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    • Handle: RePEc:iuk:wpaper:2006-13
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    File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2006-13-fratianni-kang.pdf
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    References listed on IDEAS

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    Cited by:

    1. De Sousa, José & Mirza, Daniel & Verdier, Thierry, 2018. "Terror networks and trade: Does the neighbor hurt?," European Economic Review, Elsevier, vol. 107(C), pages 27-56.
    2. 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.
    3. Alice Y. Ouyang & Ramkishen S. Rajan, 2017. "Impact of Terrorism on Cross-Border Mergers and Acquisitions (M&As): Prevalence, Frequency and Intensity," Open Economies Review, Springer, vol. 28(1), pages 79-106, February.
    4. Daniel Mirza & Thierry Verdier, 2014. "Are Lives a Substitute for Livelihoods? Terrorism, Security, and US Bilateral Imports," Journal of Conflict Resolution, Peace Science Society (International), vol. 58(6), pages 943-975, September.
    5. Volker Nitsch, 2009. "Terrorismus und internationaler Handel: Probleme und Ergebnisse empirischer Untersuchungen," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 78(4), pages 41-50.
    6. Matthew Oladapo Gidigbi & Benedict Akanegbu, 2017. "Does Financial Integration Exist in ECOWAS?," Journal of Social and Development Sciences, AMH International, vol. 8(2), pages 14-27.
    7. Qureshi, Mahvash Saeed, 2013. "Trade and thy neighbor's war," Journal of Development Economics, Elsevier, vol. 105(C), pages 178-195.
    8. Ronald B. Davies & Zuzanna Studnicka, 2022. "Tariff Evasion, the Trade Gap, and Structural Trade," CESifo Working Paper Series 10151, CESifo.
    9. van Bergeijk, P.A.G., 2009. "Some economic historic perspectives on the 2009 world trade collapse," ISS Working Papers - General Series 476, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
    10. Haider, Murtaza & Anwar, Amar, 2014. "Impact of terrorism on FDI flows to Pakistan," MPRA Paper 57165, University Library of Munich, Germany.
    11. Sami Bensassi & Inmaculada Martínez-Zarzoso, 2012. "How Costly is Modern Maritime Piracy to the International Community?," Review of International Economics, Wiley Blackwell, vol. 20(5), pages 869-883, November.
    12. Pham, Cong S. & Doucouliagos, Chris, 2017. "An Injury to One Is an Injury to All: Terrorism's Spillover Effects on Bilateral Trade," IZA Discussion Papers 10859, Institute of Labor Economics (IZA).
    13. Zahoor Ul Haq & Zia Ullah & Javed Iqbal, 2018. "Terrorist Incidents and Trade," Global Social Sciences Review, Humanity Only, vol. 3(2), pages 55-70, June.
    14. Amar Iqbal Anwar & Mazhar Mughal, 2013. "Foreign Financial Flows and Terrorism In Developing Countries," Working Papers hal-01885149, HAL.
    15. Jerónimo Carballo & Georg Schaur & Christian Volpe Martincus, 2016. "Trust No One?: Security and International Trade," IDB Publications (Working Papers) 94636, Inter-American Development Bank.
    16. Carballo, Jerónimo & Schaur, Georg & Volpe Martincus, Christian, 2016. "Trust No One?: Security and International Trade," IDB Publications (Working Papers) 7684, Inter-American Development Bank.
    17. Şennur SEZGİN, 2019. "International Trade and Terror Relationship in TurkeyAbstract:In this study, the effect of terrorism on international trade is examined in the case of Turkey. Between 1980 and 2015, along with many im," Sosyoekonomi Journal, Sosyoekonomi Society.
    18. Arsalan Ahmed & Qi Jian Hong & Hassan Tahir, 2021. "Analysis of Pakistan–China FTA by propensity score matching with difference in differences," SN Business & Economics, Springer, vol. 1(7), pages 1-29, July.

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    More about this item

    Keywords

    financial crisis; natural disaster; trade gravity model; transaction cost;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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