On the origin of domestic and international terrorism

Abstract

We analyze the determinants of the origin of domestic and international terrorism in a large panel data set of 159 countries spanning from 1970 to 2007. We show that terror increases with GDP per capita, a higher polity score measuring a more open and competitive political system and experiences of domestic conflict, anarchy and regime transitions. Our evidence thus contradicts the notion that terrorism is rooted in economic deprivation or that strongly autocratic regimes breed more terrorists. Rather we show that weak or failing states are an incubator for terrorism. We also show that the causes of domestic terror and international terror are similar.

Introduction

Cross-country empirical research on the economics of terrorism has centered on two questions: “Where do terrorists strike?” and “What breeds terrorism?” Three groups of country characteristics have been identified as determining terrorists' choices of targets and the likelihood of “breeding” terrorists in a particular country: (1) Economic conditions and the state of development as measured by GDP per capita and its growth rate, economic freedom, quality of institutions and infrastructure, human development index and the level of education, (2) political freedom and civil liberties, measured inter alia by composite indexes (Polity IV or Freedom House index) and participation rate in elections, and (3) political stability, which is influenced by the occurrence of civil wars, riots, military conflicts and also captured by regime durability, and times of transition or anarchy. Other control variables include openness of the economy and population size, among others.¹

Despite a growing body of sound empirical studies, no consensus has emerged on the determinants of terror; on the contrary, estimates have differed widely in sign, size, and significance (cf. Section 2). For instance, while Blomberg and Hess, 2008a, Blomberg and Hess, 2008b, Lai, 2007 find a negative impact of GDP per capita on terror activity, Krueger and Malečkova (2003) find no impact and Kurrild-Klitgaard et al., 2006, Freytag et al., 2009 find a positive relationship. While Krueger and Malečkova (2003) see political repression as a main cause for terrorism, and Kurrild-Klitgaard et al. (2006) and many others find that democracy reduces the production of terrorists, Basuchoudhary and Shughart (2010) find no effect of political and civil liberties on the origin of terror; Lai (2007) shows that democracies (and anocracies) produce more terrorists than autocracies. There is thus a need for further comprehensive studies on the determinants of terrorism (cf. Llussá and Tavares, 2008).

We provide such a comprehensive study. We analyze the determinants of terrorism in a panel approach using the Global Terrorism Database that covers the time span 1970–2007 and 159 countries and that includes international and domestic terrorism for the entire period. This unique feature of our database allows us to separately analyze and compare the determinants for both types of terrorism.

Most previous analyses have focused on international terrorism, despite its lesser importance: out of the 22 studies that we survey in Table A1, only six also study domestic terrorism; only two give separate results for domestic terror and only for very limited time periods. Yet, domestic terror attacks are by far more numerous than international ones: in our data set, only about 14% of the almost 82,000 terror incidents were international terror events. Similarly, Abadie (2006, p.50) notes that for the year 2003 the “MIPT Terrorism Knowledge Base (2004) reports 1536 events of domestic terrorism, but only 240 events of international terrorism.” That is a share of less than 16%. This begs the question whether results derived from studies of international terrorism carry over to the case of domestic terrorism and thus provide insights into the determinants of the general phenomenon of terrorism. Alternatively, international terror may be structurally different from domestic terror and it would be highly interesting to analyze in what way.

Studies on international terrorism have focused either on the target countries or on the origin countries of transnationally operating terror groups and have related country characteristics to the number of terror incidences for each year.² Yet, in all likelihood, the decision to form a terror group in one country and to commit an act of terror in another country is determined by country characteristics of the origin country and the target country. Focusing on one set of countries only – target or origin – implies a potential omitted variable bias if the country characteristics of the origin countries are not orthogonal to those of the target countries. Orthogonality however is a rather strong assumption. This problem is absent in the analysis of domestic terror, which makes it particularly suited for the commonly used monadic approach.³

The almost complete neglect of domestic terrorism has been due to a lack of appropriate data. Existing data sets either cover only international terror (ITERATE, Country Reports on Terrorism by the US State Department) or have limited geographical or time coverage of domestic terror (MIPT, TWEED).⁴ Using a data set that has not yet been applied to the economic analysis of terror, we fill this important gap in the literature. We use the Global Terrorism Database provided by the National Consortium for the Study of Terrorism and Responses to Terrorism (START) that reports international and domestic terror incidences since 1970. This allows a much more comprehensive analysis of terror, as we are not limited to only about 15% of all terror incidents (as most of the previous studies); moreover, it enables us to compare the determinants of domestic and international terrorism. In our negative binomial regression models we use a wide array of explanatory variables that cover economic well-being, the structure of the economy and the stage of economic development, the political system and various dimensions of political stability including conflicts of various types, regime durability (by regime type), transition experiences and anarchy.

In this paper we explore the determinants of the creation of terror, as this is arguably the more fundamental question of the aforementioned two. In other words, for international terror we look at the country of origin rather than the target country. We find that the likelihood of terror incidents to originate from a country increases with its level of GDP per capita and is higher for more democratic states than for strongly authoritarian regimes. Experiences of instability – domestic conflict, anarchy and regime transitions – increase the likelihood of terror originating from this country.

Our paper is organized as follows. In the next section, we survey the relevant empirical literature. Section 3 explains our empirical approach and describes our data. Section 4 presents the results: first we report a set of baseline results, which we subsequently extend in various directions. Section 5 concludes.