Terrorism and Economic Complexity: An Impact Evaluation
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Johnson, William
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Abstract
This thesis describes the impact of terrorism on the economic complexity of countries. Terrorism wreaks havoc on multiple elements of economies. A discussion of relevant literature will lend itself to the logic behind two theoretical frameworks that are employed to help speculate why terrorism may cause changes to country-level economic complexity. The frameworks, which I developed, are referred to as the Labor Market Depletion Framework, and the Capital Flight Framework. Four statistical models were analyzed. First, a comparison of means test was conducted, which indicated no correlation between economic complexity of countries in which terrorism occurred compared to those in which it did not occur. Three other multiple regression models were analyzed, and incorporated different terrorism measures, and all controlled for gross domestic product (GDP) per capita and region. The terrorism measure for the second model was a binary measure of terrorism occurrence (yes or no), and showed counterintuitive results – that in countries where terrorism occurred, economic complexity values were higher; the measure for the third model utilized the natural logarithm of a terrorism score (which includes number of people killed, wounded, and hostages) and excluded outliers, and indicated counterintuitive results by similarly showing that countries with more terrorism were associated with higher complexity levels; and the fourth model utilized the natural logarithm of a terrorism score (which includes number of people killed, wounded, and hostages) and included all available data, and indicated that countries with more terrorism showed lower levels of economic complexity, although the relationship is insignificant. The study concludes by discussing reasoning for the counterintuitive nature of some of the results.
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Keywords
Terrorism, Complexity, Regressive, Labor markets