Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/170843
Authors: 
Pham, Cong S.
Doucouliagos, Chris
Year of Publication: 
2017
Series/Report no.: 
IZA Discussion Papers 10859
Abstract: 
In this paper we investigate whether the effects of terrorism in one country spillover to affect trade in neighboring nations. Using a sample of more than 160 countries from 1976 to 2014, we report robust evidence that terrorist attacks in a nation's contiguous neighbors significantly reduce bilateral trade. Each additional terrorist attack in a neighboring country reduces bilateral trade by nearly 0.013% on average, which translates into a reduction of about $6.4 million USD in total trade. Trade effects from terrorist incidents are higher in sub-Sahara. Adverse trade effects hold for different flow and stock measures of terrorism, and even for terrorist incidents with zero casualties. Spillovers from terrorism are relatively long-lived, depressing bilateral trade up to five years after a terrorist event. Our findings are consistent with terrorism adversely impacting bilateral trade through several channels: psychological distress, higher trade costs arising from increased trade insecurity and regulatory burden, and adverse effects on income and trade reform.
Subjects: 
terrorism
spillovers
bilateral trade
JEL: 
F14
D74
H56
Document Type: 
Working Paper

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