The Effect of Crime on Terrorism: A Nonlinear Dynamic Panel Data Analysis

As the link between crime and terrorism is of practical and academic relevance, to analyze this relationship, we employ a non-linear system GMM analysis on a newly created data set for 75 countries from 2003 to 2020. We find a U-shaped relationship between crime and terrorism: Below a critical level of crime, crime has a negative significant effect on terrorism, as there is substitution between crime and terrorism, while above the threshold, crime has a positive significant effect on terrorism, indicating complementarity between crime and terrorism. Moreover, we find evidence for the existence of terrorist inertia and add to the theory by developing a new version of the crime trap. Despite data limitations and accounting for potential ecological pitfalls, our findings provide a starting point for further research on how to address crime and terrorism simultaneously.