International trade, security and transnational terrorism: theory and a survey of empirics

In this paper, we offer a new and general analytical framework to illustrate the complex two-way interactions between trade and transnational terrorism. We then survey the recent economic literature in light of this framework by pointing to the importance in empirical studies of: (a) accounting for omitted variables that may be correlated with both terrorism and trade; (b) considering more seriously the intertemporal persistence of terrorism between specific pairs of countries as it affects GDP and GDP per capita regressors; (c) distinguishing the potential impact of incidents occurring in a particular country from the effects of incidents targeted towards or sourced in the country; and (d) most importantly, controlling appropriately for the potential endogeneity that prevails between terrorism, security measures and trade, very much ignored in the literature