The adverse effect of transnational and domestic terrorism on growth in Africa

Abstract This article investigates the adverse effects of domestic and transnational terrorism on income per capita growth for 51 African countries for 1970–2007, while accounting for cross-sectional (spatial) dependence and conflict (i.e. internal conflicts and external wars). The findings of the fixed-effects panel estimator suggest that transnational terrorism has a significant, but modest, marginal impact on income per capita growth. These results hold for two different terrorism event datasets. However, domestic terrorist events do not affect income per capita growth. Our findings differ from those in an earlier study on the impact of transnational terrorism on African growth, because we uncover a much more moderate effect. In our study, regional impacts and terrorism–conflict interactions effects are also distinguished. Moreover, our sample countries and period are more extensive. Our article contains a host of robustness checks involving macroeconomic and political variables that find virtually identical results. Alternative terrorist variables are also used, with little qualitative change in the findings. The absence of a domestic terrorism impact is surprising because there were many more domestic than transnational terrorist incidents in Africa. To promote growth, host and donor countries must direct scarce counter-terrorism resources to protect against transnational terrorism in particular. The modest impact of transnational terrorism on African growth means that developing countries' economies have been more resilient to terrorism than has been generally thought.