The effects of terrorism on economic growth: Panel data approach

Headnote

Abstract

The aim of this study is to examine the effects of terrorism on economic growth experienced worldwide. More precisely these terrorist incidents and its effects on economic growth in most countries are classified according to income groups. In this respect, we conduct a panel study (FE and RE models) to analyze the number of terrorist incidents in these countries and the data range from 2000 to 2015 covering a total of 115 countries. The result of the study is in line with other findings in the literature. Those terrorist attacks are causing a negative impact on the economic growth in most countries, particularly in low-income countries. Generally speaking, the findings show that low-income countries are affected about three times more than high-income countries as a result of these terrorist attacks.

Key words: terror, terrorism, economic growth, panel data, FE and RE models

JEL classification: C23, F52, H1, O4

Sažetak

Cilj ovog istraživanja je ispitati učinke terorističkih aktivnosti diljem svijeta na ekonomski rast. Točnije, ovi teroristički napadi i njihovi učinci na gospodarski rast u većini zemalja klasificiraju se prema dohotku. U tom smislu, provodimo ispitivanje panela (FE i RE modeli) kako bismo analizirali broj terorističkih incidenata u tim zemljama i raspon podataka u periodu od 2000. do 2015. godine, a koji obuhvaća ukupno 115 zemalja. Rezultati istraživanja su u skladu s drugim nalazima u literaturi. Ti teroristički napadi uzrokuju negativan utjecaj na gospodarski rast u većini zemalja, posebice u zemljama s niskim prihodima. Općenito, rezultati pokazuju da su zemlje s niskim prihodima pogoðene oko tri puta više od zemalja s visokim dohotkom kao rezultat tih terorističkih napada.

Ključne riječi: teror, terorizam, gospodarski rast, panel podaci, FE i RE modeli

JEL klasifikacija: C23, F52, H1, O4

(ProQuest: ... denotes formulae omitted.)

1.Introduction

Terrorism is as an old concept as human history. The concept of terrorism dates back to combat terrorism against the Romans and the Sicarii in the B. C. 7366 (Dedeoğlu, 2003: 315; Kutlu, 2010: 16). However, to be used as a systematic tool is based on the organization in the Assassins led by Hasan Sabbah, which emerged in the 13th century in the Middle East (Akgün, 2006: 410).

Terrorism in the modem sense comes from French word "terror" which means extreme fear and...