TY - CEPII
A1 - José de Sousa
A1 - Daniel Mirza
A1 - Thierry Verdier
TI - Terrorism Networks and Trade: Does the Neighor Hurt?
IS - 2010-04
T3 - Working Papers
KW - Terrorism
KW - Trade
KW - Security
N2 - We study the impact of transnational terrorism diffusion on security and trade. We set a simple theoretical model predicting that the closer a country 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 from 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.
ER -