The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Terrorism, Economics Of

  • S. Brock Blomberg
  • Gregory D. Hess
Reference work entry


This article provides a comprehensive study of the economic determinants of domestic and transnational terrorism and the role that the economy plays in fostering a more peaceful world. We describe the research associated with the microfoundations of terrorist groups and how they organize. We also analyse models of conflict resolution to investigate the relative importance of macroeconomic factors for domestic and transnational terrorism. We describe a number of data-sets employed by researchers in the field and end by describing the most recent research which investigates the linkages between terrorism, democratization, globalization and development.


Civil conflict Democratization Development Foreign direct investment Globalization Gravity models International trade Terrorism, economics of War and economics 

JEL Classifications

E6 H1 H5 D74 O11 
This is a preview of subscription content, log in to check access.


  1. Abadie, A., and J. Gardeazabal. 2003. The economic costs of conflict: A case study of the Basque country. American Economic Review 93: 113–132.CrossRefGoogle Scholar
  2. Bell, J.B. 1990. Revolutionary dynamics: The inherent inefficiencies of the underground. Terrorism and Political Violence 2: 193–211.CrossRefGoogle Scholar
  3. Bell, J.B. 2002. The organization of Islamic terror: The global jihad. Journal of Management Inquiry 11: 261–266.CrossRefGoogle Scholar
  4. Berman, E., and D. Laitin. 2005. Hard targets: Theory and evidence on suicide attacks, Working Paper No. 11740. Cambridge, MA: NBER.CrossRefGoogle Scholar
  5. Bernholz, P. 2004. Supreme values as the basis for terror. European Journal of Political Economy 20: 317–333.CrossRefGoogle Scholar
  6. Blomberg, S.B., and G.D. Hess. 2006. How much does violence tax trade? Review of Economics and Statistics 88: 599–612.CrossRefGoogle Scholar
  7. Blomberg, S.B., and G.D. Hess. 2007a. The Lexus and the olive branch. In Economic consequences of terrorism in developed and developing countries, ed. P. Keefer and N. Loayza. Cambridge: Cambridge University Press.Google Scholar
  8. Blomberg, S.B., and G.D. Hess. 2007b. From (no) butter to guns? Understanding the economic role in terrorism. In Economic consequences of terrorism in developed and developing countries, ed. P. Keefer and N. Loayza. Cambridge: Cambridge University Press.Google Scholar
  9. Blomberg, S.B., G.D. Hess, and A. Orphanides. 2004a. The macroeconomic consequences of terrorism. Journal of Monetary Economics 51: 1004–1030.CrossRefGoogle Scholar
  10. Blomberg, S.B., G.D. Hess, and A. Weerapana. 2004b. An economic model of terrorism. Conflict Management and Peace Science 21: 17–28.CrossRefGoogle Scholar
  11. Blomberg, S.B., G.D. Hess, and A. Weerapana. 2004c. Economic conditions and terrorism. European Journal of Political Economy 20: 463–478.CrossRefGoogle Scholar
  12. Blomberg, S.B., and A. Mody. 2006. How severely does violence deter international investment? Working paper, International Monetary Fund.Google Scholar
  13. Blomberg, S.B., and P. Rosendorff. 2007. A gravity model of globalization, democracy and transnational terrorism. In Guns and butter: The economic causes and consequences of violent conflict, ed. G. Hess. Cambridge, MA: MIT Press.Google Scholar
  14. Brynjar, L., and T. Hegghammer. 2004. Jihadi strategic studies: The alleged Al Qaida policy study preceding the Madrid bombings. Studies in Conflict and Terrorism 27: 355–375.CrossRefGoogle Scholar
  15. Bueno de Mesquita, E. 2005. The quality of terror. American Journal of Political Science 49: 515–530.CrossRefGoogle Scholar
  16. Crenshaw, M. 2001. Why America? The globalization of civil war. Current History 100: 425–432.Google Scholar
  17. Eckstein, Z., and D. Tsiddon. 2004. Macroeconomic consequences of terror: Theory and the case of Israel. Journal of Monetary Economics 51: 971–1002.CrossRefGoogle Scholar
  18. Enders, W., and T. Sandler. 2002. Patterns of transnational terrorism, 1970–1999: Alternative time-series estimates. International Studies Quarterly 46: 145–165.CrossRefGoogle Scholar
  19. Enders, W., and T. Sandler. 2005. After 9–11: Is it all so different now? Journal of Conflict Resolution 49: 259–277.CrossRefGoogle Scholar
  20. Eubank, W., and L. Weinberg. 1994. Does democracy encourage terrorism? Terrorism and Political Violence 6: 417–443.CrossRefGoogle Scholar
  21. Eubank, W., and L. Weinberg. 1998. Terrorism and democracy: What recent events disclose. Terrorism and Political Violence 10: 108–118.CrossRefGoogle Scholar
  22. Eubank, W., and L. Weinberg. 2001. Terrorism and democracy: Perpetrators and victims. Terrorism and Political Violence 13: 155–164.CrossRefGoogle Scholar
  23. Glick, R., and A. Taylor. 2004. Collateral damage: The economic impact of war, Working Paper No. 11565. Cambridge, MA: NBER.Google Scholar
  24. Grossman, H.I. 1991. A general equilibrium model of insurrections. American Economic Review 81: 912–921.Google Scholar
  25. Hess, G.D., and A. Orphanides. 1995. War politics: An economic, rational-voter framework. American Economic Review 85: 828–846.Google Scholar
  26. Hess, G.D., and A. Orphanides. 2001a. Economic conditions, elections, and the magnitude of foreign conflicts. Journal of Public Economics 80: 121–140.CrossRefGoogle Scholar
  27. Hess, G.D., and A. Orphanides. 2001b. War and democracy. Journal of Political Economy 109: 776–810.CrossRefGoogle Scholar
  28. Hoffman, B. 1997. The confluence of international and domestic trends in terrorism. Terrorism and Political Violence 9: 1–15.Google Scholar
  29. Hudson, R.A. 1999. The sociology and psychology of terrorism: Who becomes a terrorist and why? Washington, DC: Federal Research Division, Library of Congress.Google Scholar
  30. Krueger, A.B., and J. Maleckova. 2003. Education, poverty and terrorism: Is there a causal connection? Journal of Economic Perspectives 17(4): 119–144.CrossRefGoogle Scholar
  31. Krug, B., and P. Reinmoeller. 2004. The hidden cost of ubiquity: Globalisation and terrorism. Research paper, Erasmus Research Institute of Management, RSM Erasmus University.Google Scholar
  32. Laqueur, W. 1977. Terrorism. London: Weidenfeld and Nicolson.Google Scholar
  33. Li, Q. 2005. Does democracy promote or reduce transnational terrorist incidents? Journal of Conflict Resolution 49: 278–297.CrossRefGoogle Scholar
  34. Li, Q., and D. Schaub. 2004. Economic globalization and transnational terrorism: A pooled time-series analysis. Journal of Conflict Resolution 48: 230–258.CrossRefGoogle Scholar
  35. Mickolus, E.F., T. Sandler, J.M. Murdock, and P. Flemming. 2004. International terrorism: Attributes of terrorist events, 1968–2003 (ITERATE 5). Dunn Loring: Vinyard Software.Google Scholar
  36. Mishal, S., and A. Sela. 2002. Participation without presence: Hamas, the Palestinian authority and the politics of negotiated existence. Middle Eastern Studies 38(3): 1–26.CrossRefGoogle Scholar
  37. Pape, R. 2005. Dying to win. New York: Random House.Google Scholar
  38. Wilhelmsen, J. 2004. When separatists become Islamists: The case of Chechnya, Report No. 2004/00445. Kjeller: Norwegian Defence Research Establishment (FFI).Google Scholar
  39. Wilkinson, P. 2001. Terrorism versus democracy: The liberal state response. London: Frank Cass.Google Scholar
  40. Wintrobe, R. 2002. Can suicide bombers be rational? Unpublished manuscript, University of Western Ontario.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • S. Brock Blomberg
    • 1
  • Gregory D. Hess
    • 1
  1. 1.