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International Terrorism, International Trade, and Borders

  • 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)

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.

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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2006-13.

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Date of creation: 2006
Date of revision:
Handle: RePEc:iuk:wpaper:2006-13
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  12. Barro, R.J., 1989. "Economic Growth In A Cross Section Of Countries," RCER Working Papers 201, University of Rochester - Center for Economic Research (RCER).
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  14. Tavares, Jose, 2004. "The open society assesses its enemies: shocks, disasters and terrorist attacks," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 1039-1070, July.
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  17. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
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