Terrorism and subjective financial well-being: micro-level evidence from Pakistan
- 68 Downloads
This paper exploits individual-level data on self-reported financial situations and district-level information on terrorist attacks in Pakistan to examine how persistent exposure to terrorism affects subjective financial well-being. The study also explores the relationship between recurrent terrorist acts and an individual’s perception of the financial well-being of other people in the community. Our model accounts for myriad influences of terrorism and financial statuses both at the individual and district levels. We find that terrorism adversely impacts subjective financial well-being. In particular, its negative effects on perceived personal financial conditions appear to be stronger for less-educated persons and those living in urban areas.
KeywordsTerrorism Financial well-being Risk Pakistan
JEL classificationD14 D74 G40
We are grateful to Todd Sandler and William F. Shughart II for their thoughtful comments. The article also benefited from comments by two anonymous reviewers and by participants at the 2018 Political Violence and Policy conference, University of Texas at Dallas. All remaining errors are ours.
- Abadie, A., & Gardeazabal, J. (2003). The economic costs of conflict: A case study of the Basque Country. American Economic Review, 93(1), 113–132.Google Scholar
- Abadie, A., & Gardeazabal, J. (2008). Terrorism and the world economy. European Economic Review, 52(1), 1–27.Google Scholar
- Abeyta, A. A., Routledge, C., Kersten, M., & Cox, C. R. (2017). The existential cost of economic insecurity threatened financial security undercuts meaning. Journal of Social Psychology, 157(6), 692–702.Google Scholar
- Alesina, A., Di Tella, R., & MacCulloch, R. (2004). Inequality and happiness: Are Europeans and Americans different? Journal of Public Economics, 88(9–10), 2009–2042.Google Scholar
- Bandyopadhyay, S., Sandler, T., & Younas, J. (2014). Foreign direct investment, aid, and terrorism. Oxford Economic Papers, 66(1), 25–50.Google Scholar
- Bandyopadhyay, S., Sandler, T., & Younas, J. (2018). Trade and terrorism: A disaggregated approach. Journal of Peace Research, 55(5), 656–670.Google Scholar
- Becker, G., & Rubinstein, Y. (2011). Fear and the response to terrorism: An economic analysis. London School of Economics: Centre for Economic Performance.Google Scholar
- Benette-Jones, O. (2011). Pakistan: A failed state or a clever gambler? BBC News Online. https://www.bbc.com/news/world-south-asia-13318673. Accessed 18 Feb 2018.
- Berrebi, C., & Guedalia-Ephrat, S. (2018). The effect of terrorism on life satisfaction: The case of religious and secular population in Israel. Department of Economics working paper. Jerusalem: Hebrew University.Google Scholar
- Berrebi, C., & Ostwald, J. (2015). Terrorism and fertility: Evidence for a causal inference of terrorism on fertility. Oxford Economic Papers, 67(1), 63–82.Google Scholar
- Berrebi, C., & Ostwald, J. (2016). Terrorism and the labor force: Evidence of an effect on female labor force participation and the labor gender gap. Journal of Conflict Resolution, 60(1), 32–60.Google Scholar
- Blair, G., Fair, C. C., Malhotra, N., & Shapiro, J. N. (2013). Poverty and support for militant politics: Evidence from Pakistan. American Journal of Political Science, 57(1), 30–48.Google Scholar
- Blomberg, S. B., & Hess, G. H. (2006). How much does violence tax trade? Review of Economics and Statistics, 88(4), 599–612.Google Scholar
- Blomberg, S. B., Hess, G. H., & Orphanides, A. (2004). The macroeconomic consequences of terrorism. Journal of Monetary Economics, 51(5), 1007–1032.Google Scholar
- Brüggen, E. C., Hogreve, J., Holmlund, M., Kabadayi, S., & Löfgren, M. (2017). Financial well-being: A conceptualization and research agenda. Journal of Business Research, 79, 228–237.Google Scholar
- Central Intelligence Agency (CIA). (2017). The world factbook. https://www.cia.gov/library/publications/the-world-factbook/geos/pk.html. Accessed 21 Jan 2018.
- Clark, A. E., Frijters, P., & Shields, M. A. (2008). Relative income, happiness, and utility: An explanation for the Easterlin paradox and other puzzles. Journal of Economic Literature, 46(1), 95–144.Google Scholar
- De Mesquita, E. B., Fair, C. C., Rais, R. B., & Shapiro, J. N. (2015). Measuring political violence in Pakistan: Insights from the BFRS dataset. Conflict Management and Peace Science, 5, 536–558.Google Scholar
- Drakos, K. (2010). Terrorism activity, investor sentiment, and stock returns. Review of Financial Economics, 19(3), 128–135.Google Scholar
- Drakos, K., & Kutan, A. K. (2003). Regional effects of terrorism on tourism in three Mediterranean countries. Journal of Conflict Resolution, 47(5), 621–641.Google Scholar
- Easterlin, R. A. (1995). Will raising the incomes of all increase the happiness of all? Journal of Economic Behavior & Organization, 27(1), 35–47.Google Scholar
- Enders, W., & Sandler, T. (1996). Terrorism and foreign direct investment in Spain and Greece. Kyklos, 49(3), 331–352.Google Scholar
- Enders, W., Sandler, T., & Parise, G. F. (1992). An econometric analysis of the impact of terrorism on tourism. Kyklos, 45(4), 531–554.Google Scholar
- Fair, C. C., Malhotra, N., & Shapiro, J. N. (2014). Democratic values and support for militant politics: Evidence from a National Survey of Pakistan. Journal of Conflict Resolution, 58(5), 743–770.Google Scholar
- Frey, B. S., Luechinger, S., & Stutzer, A. (2007). Calculating tragedy: Assessing the costs of terrorism. Journal of Economic Surveys, 21(1), 1–24.Google Scholar
- Frey, B. S., & Stutzer, A. (2000). Happiness, economy and institutions. The Economic Journal, 110(466), 918–938.Google Scholar
- Gaibulloev, K., & Sandler, T. (2008). Growth consequences of terrorism in Western Europe. Kyklos, 61(3), 411–424.Google Scholar
- Gaibulloev, K., & Sandler, T. (2009). The impact of terrorism and conflicts on growth in Asia. Economics and Politics, 21(3), 359–383.Google Scholar
- Gaibulloev, K., & Sandler, T. (2011). The adverse effect of transnational and domestic terrorism on growth in Africa. Journal of Peace Research, 48(3), 355–371.Google Scholar
- Gaibulloev, K., & Sandler, T. (forthcoming). What we have learned about terrorism since 9/11. Journal of Economic Literature, 57(2).Google Scholar
- Gill, P. (2015). The impact of drone attacks on terrorism: The case of Pakistan. Remote Control Project report. London: Oxford Research Group.Google Scholar
- Hojman, D. A., Miranda, Á., & Ruiz-Tagle, J. (2016). Debt trajectories and mental health. Social Science and Medicine, 167, 54–62.Google Scholar
- Jaeger, D. A., & Siddique, Z. (2018). Are drone strikes effective in Afghanistan and Pakistan? On the dynamics of violence between the United States and the Taliban. CESifo Economic Studies (forthcoming).Google Scholar
- Jamal, H. (2009). Estimation of multidimensional poverty in Pakistan. Karachi: Social Policy and Development Centre.Google Scholar
- Khan, I. (2017). Pakistan suffers $123.1 billion losses in terror war. The News. https://www.thenews.com.pk/print/206709-Pakistan-suffers-1231-bn-losses-in-terror-war. Accessed 5 April 2018.
- Khan, M. (2017). Poverty, social issues behind terrorism. The Nation. https://nation.com.pk/30-Aug-2017/poverty-social-issues-behind-terrorism. Accessed 21 Jan 2018.
- Lelkes, O. (2006). Tasting freedom: Happiness, religion and economic transition. Journal of Economic Behavior & Organization, 59(2), 173–194.Google Scholar
- Malik, Z., & Zaman, K. (2013). Macroeconomic consequences of terrorism in Pakistan. Journal of Policy Modeling, 35(6), 1103–1123.Google Scholar
- Marshall, R. D., Bryant, R. A., Amsel, L., Jung Suh, E., Cook, J. M., & Neria, Y. (2007). The psychology of ongoing threat: Relative risk appraisal, the September 11 attacks, and terrorism-related fears. American Psychologist, 62(4), 304–316.Google Scholar
- Mirza, D., & Verdier, T. (2014). Are lives a substitute for livelihoods? Terrorism, security, and U.S. bilateral imports. Journal of Conflict Resolution, 58(6), 943–975.Google Scholar
- National Consortium for the Study of Terrorism and Responses to Terrorism (START). (2015). Global terrorism database (GTD). www.start.umd.edu/gtd. Accessed 25 Jan 2018.
- Population and Housing Census. (2017). 6th population and housing census. Islamabad: Pakistan Bureau of Statistics.Google Scholar
- Rana, M. A. (2014). Pakistan security report 2013. Islamabad: Pakistan Institute for Peace Studies.Google Scholar
- Rehman, F. U., & Vanin, P. (2017). Terrorism risk and democratic preferences in Pakistan. Journal of Development Economics, 124, 95–106.Google Scholar
- Stiglitz, J., Sen, A., & Fitoussi, J. P. (2009). The measurement of economic performance and social progress revisited: Reflections and overview. Paris: Commission on the Measurement of Economic Performance and Social Progress.Google Scholar
- Tabassam, A. H., Hashmi, S. H., & Rehman, F. U. (2016). Nexus between political instability and economic growth in Pakistan. Precedia-Social and Behavioral Sciences, 230, 325–334.Google Scholar
- Van Praag, B. M., Frijters, P., & Ferrer-i-Carbonell, A. (2003). The anatomy of subjective well-being. Journal of Economic Behavior & Organization, 51(1), 29–49.Google Scholar
- Veenhoven, R. (2009). Well-being in nations and well-being of nations. Social Indicators Research, 91(1), 5–21.Google Scholar
- Wills-Herrera, E., Orozco, L. E., Forero-Pineda, C., Pardo, O., & Andonova, V. (2011). The relationship between perceptions of insecurity, social capital and subjective well-being: Empirical evidences from areas of rural conflict in Colombia. The Journal of Socio-Economics, 40(1), 88–96.Google Scholar
- Younas, J. (2015). Does globalization mitigate the adverse of effects of terrorism on growth? Oxford Economic Papers, 67(1), 133–156.Google Scholar