What causes terrorism?

Transcription

1 Public Choice (2011) 147: 3 27 DOI /s What causes terrorism? Tim Krieger Daniel Meierrieks Received: 14 December 2008 / Accepted: 14 January 2010 / Published online: 28 January 2010 Springer Science+Business Media, LLC 2010 Abstract We provide an overview of empirical evidence on the determinants of terrorism, in particular focusing on the origins and targets of transnational terrorism. We also assemble several broad theoretical families that relate terrorism to, e.g., economic, political and institutional and demographic factors. We provide a critical discussion of the existing empirical evidence and refer to a number of areas of future research before describing some modest policy implications. Keywords Determinants of terrorism Transnational terrorism Counter-terrorism policy JEL Classification D74 H56 N40 1 Introduction Since the attacks on the US on September 11, 2001, politicians and the public have tried to bring to light the factors that incite terror. The then US President George W. Bush (2002)argued that there is a vicious circle of disenfranchisement, state failure and terror, stating that because [...] persistent poverty and oppression can lead to hopelessness and despair [...] failed states can become havens for terror. The media and public were highly receptive to lines of argumentation that linked terror to socio-economic and political underdevelopment. Accordingly, policy measures have been advocated that aim at alleviating underdevelopment, e.g., by reducing socio-economic strain or political instability. For instance, the then German Chancellor Gerhard Schröder (2003) argued that [...] to address the root causes of terrorism and insecurity [...] we must ensure social and material but also cultural security. T. Krieger ( ) D. Meierrieks Department of Economics, University of Paderborn, Warburger Straße 100, Paderborn, Germany tim.krieger@notes.uni-paderborn.de D. Meierrieks daniel.meierrieks@notes.uni-paderborn.de

2 4 Public Choice (2011) 147: 3 27 Unveiling the causes of terrorism and deriving sound policy advice is important because terrorism is costly to affected countries. Even if the immediate costs of terrorism are marginal, its indirect political and economic costs may be substantial. For instance, terrorism may reduce governmental stability (Gassebner et al. 2008). Terrorism may also negatively impact trade and capital flows and thus economic development (Nitsch and Schumacher 2004; Crain and Crain 2006; Abadie and Gardeazabal 2008; Mirza and Verdier 2008) and may result in a loss of individual and collective life satisfaction (Frey et al. 2009). Given popular discourse and the unquestioned costs of terrorism, we provide a survey of empirical studies on the determinants of terrorism. In Sect. 2 we discuss the basic theoretical ideas underlying an economic analysis of terrorism. In Sect. 3 we review the empirical literature on terrorism determinants. We focus on large-sample studies with long time horizons to assess long-run global trends. We also present complementary evidence where relevant, recognizing that case- or region-specific studies and micro evidence may be important to revealing specific dynamics of terrorism. For this review we focus on the sources (terrorists countries of origin) and targets of transnational terrorism, as the majority of empirical studies have focused on this form of terrorism. 1 Our discussion should help to clarify which broad hypotheses are most suited to explaining transnational terrorist activity and why no empirical mainstream has emerged so far. In Sect. 4 we sum up our findings, provide some cautious policy implications and hint at avenues of future research. 2 Explaining the causes of terrorism There is no universally accepted definition of terrorism. It is commonly defined as the deliberate use of violence and intimidation directed at a large audience to coerce a community (government) into conceding politically or ideologically motivated demands. The main tactical (short-run) goals of terrorism are (1) gaining publicity and media attention, (2) destabilizing polity and (3) damaging economies (e.g., Tavares 2004). Among the long-run goals of terrorism is a redistribution of power, influence and wealth (e.g., Frey and Luechinger 2004). Terrorist organizations must have goals that are not enforceable in the ordinary political process and for whose implementation their members are willing to use force. Tactical terrorist behavior (e.g., assassinations, hostage-takings) then serves to achieve these strategic goals, making violence a means to meet more abstract objectives. Individually, terrorists must exhibit certain character traits that enable them to carry out terrorist actions. Organizationally, the dominance of group leaders, group dynamics and other (psychological) factors also influence terrorist behavior (cf. Victoroff 2005). Hence, popular opinion often links terrorism to irrationality or insanity. However, such an argumentation is too simple, perhaps even wrong. An economic view of terrorism instead assumes that terrorists are rational, so the average terrorist behaves more or less as a homo economicus (Caplan 2006). As rational actors terrorists act violently to maximize their utility, given certain benefits, costs and constraints that are linked to these actions (e.g., Sandler and Enders 2004). 2 The utility-maximizing level of terrorism is the level at which the marginal 1 Transnational terrorism refers to terrorism involving more than one country. By contrast, all terrorist acts without foreign involvement are considered domestic terrorism. For details, see Enders and Sandler (2006). Note that in the working paper version of this contribution, we also discuss the empirical evidence on domestic and other forms of terrorism. 2 There is an ongoing discussion whether suicide terrorism has (e.g., Wade and Reiter 2007) or has not (e.g., Moghadam 2006) different roots than ordinary terrorism. Thus, we do not consider analyses which only

3 Public Choice (2011) 147: Table 1 Determinants of terrorism Global hypothesis Potential determinant (abbreviation) Possible indicators Economic Deprivation (GH1) Economic Conditions (DEV) GDP p.c., poverty, inequality Modernization Strain (GH2) Economic Performance (PERF) GDP growth, unemployment, inflation Population Dynamics (POP) Population growth, size, age structure, urbanization Education (EDU) Literacy, school attainment Institutional Order (GH3) Political Institutions (POL) Political rights, civil liberties Economic Institutions (ECON) Economic freedom, property rights protection Government (GOV) Welfare policies, government spending Political Transformation (GH4) Political Stability (STAB) Regime Stability, Civil War Proxy Identity Conflict (GH5) Minorities (MIN) Ethnic or linguistic fractionalization Religion (REL) Proportions of religions, religious fractionalization Global Order (GH6) Economic Integration (INT) FDI, terms of trade, trade openness International Politics (INTPOL) Alliances, incidences of conflict or crisis, foreign aid Contagion (GH7) Contagion (CONT) Spatial, temporal proximity to terrorism Geography (GEO) Climate, elevation, latitude costs equal the marginal benefits of terrorism. Benefits from terrorism arise from obtaining the tactical and strategical terrorism goals. The costs of terrorism are, e.g., linked to the use of resources and to the opportunity costs of violent behavior (e.g., Frey and Luechinger 2004). 3 Aggregate country-specific factors impact the terrorists cost-benefit matrices and thus their behavior. Such determinants may raise (lower) the price and/or the opportunity costs of terrorism, causing a decline (increase) in terrorist activity. Using this idea, several schools of thought have put forward specific global hypotheses (GH) that emphasize the importance of certain factors in determining terrorism. Table 1 relates the global hypotheses to specific determinants and gives examples of how these determinants are measured empirically. The global hypotheses stress the role of economic deprivation (GH1), socio-economic and demographic change and resulting strain (GH2), the political order (GH3) and political transformation (GH4), identity (GH5), the global economic and political order (GH6) and focus on the determinants of suicide terrorism. See Pape (2003) and Krueger and Laitin (2008) for empirical analyses on suicide terrorism. 3 For more details on economic theories of terrorism, see Enders and Sandler (2006), Caplan (2006), Bueno de Mesquita (2008) and Shughart (2010).

4 6 Public Choice (2011) 147: 3 27 temporal and spatial contagion (GH7) in explaining terrorist activity. 4 Next, we describe the global hypotheses in detail, specifically with respect to the causal links running from certain determinants to terrorist activity. We keep this discussion rather short as we will also discuss the general hypotheses in Sect. 3. Further, the reader should be aware that the hypotheses may be of different relevance to the source and target countries of terrorism. In the following we hint at this, but delegate a more exhaustive discussion to Sect Economic deprivation Some scholars suggest that terrorism is rooted in economic deprivation, i.e., in poverty and within-country inequality. Gurr (1970) puts forward the idea of relative deprivation, where violence is generated when there is a discrepancy between what individuals think they deserve and what they actually receive through the economic (distributive) process. Poor structural economic conditions create frustration, which in turn makes violence more likely. This link from economic deprivation to terrorism should matter to the source countries of terrorism. For instance, terrorist organizations should find it easier (less costly) to recruit frustrated followers or to receive funding from supporters when economic deprivation prevails. The lack of non-violent economic activities may also fill the ranks of terrorist organizations by lowering the opportunity costs of violence. Thus, relative economic deprivation is expected to lead to more terrorism by inciting frustration and lowering the (opportunity) costs of violence. With respect to the target countries of terrorism, economic success may attract attacks when economic deprivation is assessed globally (poor vs. rich countries). 2.2 Socio-economic and demographic strain Other scholars argue that terrorism is fostered by the process of modernization. Modernization encompasses, inter alia, economic change (e.g., economic growth), new forms of communication and lifestyles (e.g., shift from agricultural to urban societies) and new ideas (e.g., Western ideology). These factors may create grievances associated with socio-economic and demographic strain (Robison et al. 2006). For instance, economic growth may be associated with a restructuring of labor markets, creating grievances among modernization losers who become unemployed due to economic change. As another example, modern forms of communication may challenge traditional elements of a society, generating social conflict (Robison et al. 2006), while terrorist organizations may use modern means of communication to disseminate their opinions more effectively (Ross 1993). Most grievances are generated during the transition from a traditional to a modern society (Ross 1993). Here, terrorists are able to capitalize on the grievances of modernization losers linked to economic dissatisfaction, new forms of alienated living or other challenges to traditional societal patterns, thus making recruitment, financing or other forms of support more likely. This mechanism is particularly relevant to the source countries of terrorism. Generally, modernization is linked to socio-economic and demographic changes which may feed through to conflict. These changes are difficult to capture in empirical analyses. Therefore, researchers often resort to specific socio-economic (e.g., low educational attainment) and demographic (e.g., population growth) factors to indicate the impact of modernization on terrorism. 4 Note that the different schools of thought are generally not truly independent of each other. For instance, while GH1 emphasizes the role of structural economic conditions in influencing terrorism, GH2 focuses on the role of socioeconomic change etc. Also, the various hypotheses do not neglect the impact of other factors on terrorist activity.

5 Public Choice (2011) 147: Political and institutional order The political and institutional order is also argued to matter to terrorism. There is an ongoing academic debate on whether a certain political system is more prepared to deal with terrorism. Democratic regimes can offer non-violent means of voicing dissent but are unable to realize hard counter-terrorism measures due to an obligation to civil liberties (Li 2005). This may make terrorism production (country of origin perspective) less likely but may increase the probability of terrorist attacks (target country perspective). Autocratic regimes can capitalize on their capability of repression which may at the same time generate grievances linked to political disenfranchisement. A low level of political openness may make the genesis of terrorism more likely but lessens the likelihood of terrorist attacks. In general, there is no consensus on which political regime can fend off terrorism most effectively. Some authors suggest that semi-open societies (partial democracies) are most prone to terrorism because they cannot capitalize on the advantages of either pure regime, suggesting a non-linear link between political institutions and terrorism. Regardless of the exact regime type, government strength (e.g., military or police power), structure (centralized vs. decentralized), policies (e.g., welfare policies) and ideological affiliation (e.g., left-wing vs. right-wing) may also influence terrorists calculi. For instance, a large-scale government may make it more difficult for societal groups to pursue rentseeking, making it more attractive to gain rents through violence (Kirk 1983). In any case, the specificity of various institutions is expected to enter the terrorists calculi in various ways. For instance, government policies and characteristics (which ensue from the political and institutional order) may also matter to terrorist activity. 2.4 Political transformation and instability Political transformation and instability are also named as causes of terrorism, in particular in popular discourse. The main idea is that political change may create political vacuums which terrorist groups use to push their agendas. Such vacuums are attractive as radical groups are less likely to be challenged by an instable, thus weak government (e.g., measured by a regime stability variable), making terrorism a less costly venture. Also, an individual may find it more attractive to join or support a radical organization because there are few non-violent alternatives (meaning low opportunity costs of violence) but high payoffs from terrorist success (meaning increased benefits of violence). Instable or failed states may even serve as schools of international terrorism, where in phases of domestic instability (e.g., civil war) individuals gain an education in violence that they can also use for internationalized terrorist campaigns (Campos and Gassebner 2009). Political transformation may generally amplify terrorist behavior, where this process influences both the production of terrorism and terrorists target decisions. 2.5 Identity and cultural clash Famously, Huntington (1996) states that civilizational clash may also result in violence. When groups exhibit different identities (e.g., different religions or ethnicities), this may lead to more conflict either between different groups within a country or between different country groups organized along civilizational lines (e.g., Islamic countries versus the West). 5 5 Note, however, that cross-country analyses usually do not directly control for between-country but for within-differences in religious or ethnic affiliation.

6 8 Public Choice (2011) 147: 3 27 For terrorist groups, it should be easier (less costly) to muster support against antagonistic identity groups (identified, e.g., by ethnic or religious fractionalization measures). This holds even more when terrorists build on identity-related ideologies that stress the supremacy of their respective identity (e.g., representing the only true faith ). Such a world view eliminates moral constraints and strengthens an organization s cohesion, making terrorism less costly and more effective (Bernholz 2006). The abstract conflict between world views also becomes manifest in realpolitik, where groups with different identities pursue different (often diametrically opposed) policies. Such behavior may, e.g., be represented in rent-seeking or other forms of socio-economic and political interaction between groups with different identities (Arce and Sandler 2003). Terrorism is used by the inferior group not only as a means to voice their world view but also to shift (material) outcomes in their favor. Identity (and opposition to other identities) works as a bond facilitating, e.g., terrorist recruitment and financial support. When terrorists succeed, related payoffs are particularly high due to the enforcement of a claim to the absolute (Bernholz 2006). 2.6 Global economic and political order The global political and economic order (globalization) may also matter to terrorism, where terrorism driven by global factors is more likely to be of an international nature. Economic integration (e.g., measured by trade openness), foreign policy (e.g., indicated by political proximity to the West) and alliance structures (e.g., indicated by membership in alliances) may play a role when developing grievances and resistance against globalization. Traditionalist or disenfranchised segments of a society may use violence to counter foreign dominance (i.e., Western supremacy) and global modernization (Bergesen and Lizardo 2004). If individuals are incited by an existing global order that is perceived as unfair, it should be easier for terrorist organizations to find support by building on related grievances in the source countries of terrorism. However, the targets of terrorism may also be chosen in response to the existing global order, especially if this order is perceived as unjust from the perpetrators perspective. For instance, a conflict between a government and an opposing group may be exported to a foreign ally of the government (Addison and Murshed 2005). Terrorism may also be used as a foreign policy tool to fight antagonistic world views, e.g., as observed during the Cold War (O Brien 1996). However, political and economic globalization does not necessarily automatically generate violence. For instance, if political integration ameliorates the international distribution of wealth and power by means of cooperation or if economic integration through trade gains also benefits the poor, it may reduce terrorist support as globalization grievances are reduced. That is, while a globalization-terrorism nexus may very well exist, its exact mechanics remain disputed. Also, it is difficult to capture in cross-country analyses. Hence, empirical analyses have often resorted to straightforward (but rough) measures of the global order, e.g., trade openness or political proximity to the US. 2.7 Contagion Contagion may be another factor explaining terrorism. The main idea is that terrorism exhibits a strong self-energizing nature with respect to both time and space (Midlarsky et al. 1980). Temporal contagion means that past terrorism bears new terrorism within one country (empirically implemented by lagged terrorism variables). For a terrorist organization it is more beneficial to run a terrorist campaign because this increases the benefits from terrorist activity (e.g., through increased media attention). Spatial contagion means that if one country suffers from terrorism, it is also likely to infect neighboring countries (e.g., indicated by

7 Public Choice (2011) 147: the distance to terrorism). Terrorist activity in one country may lead to imitational behavior in neighboring countries. Emerging terrorist groups may capitalize on the experience of existing groups in adjacent countries. Additionally, when terrorist organizations cooperate they may reduce their costs (e.g., by sharing know-how and weapons) and increase the payoff (e.g., by joint terrorist actions). Temporal and spatial proximity to terrorism may thus influence the cost-benefit considerations of terrorists in ways that may promote the generation of violence and the likelihood of a certain country being targeted. 6 3 Evidence on the determinants of terrorism In this section, we review the evidence on the determinants of transnational terrorism that tests the previously discussed global hypotheses. Due to the dyadic nature of this kind of terrorism, we first consider studies that center on factors that may impact the production of terrorism in certain countries (country of origin perspective). Then, we review the evidence regarding factors that make a country a more or less likely target of transnational terror (location of attack or target perspective). We center on cross-sectional and panel studies investigating underlying hypotheses on a global scale. Here, we acknowledge that comparing empirical studies involves some non-trivial methodological problems as the empirical setups of the studies differ, potentially leading to (artificially) conflicting evidence. Generally, this may be due to (1) differences in the dependent variables. As shown by Drakos (2009), terrorism measures constructed from different sources (e.g., ITERATE, MIPT-RAND) may correlate but nevertheless report distinct terrorism patterns, potentially as a consequence of underlying under-reporting biases (Drakos and Gofas 2006b). Also, dependent variables may be used on different time horizons, so conflicting evidence may rather point to changes in the nature of terrorism. (2) The empirical analyses use different explanatory variables. The diversity of results may to some extent be due to the econometric context. This leaves open the possibility of omitted variable biases when models are specified incompletely. Furthermore, the mere labeling of variables may hide the fact that different studies use different variables (data sources) to measure certain relationships. (3) The econometric methodology of the analyses differs. While most studies rely on negative binomial models, others employ, e.g., OLS or gravity model estimations. The dissimilarity of estimation techniques may also contribute to the dissimilarity of empirical results. In order to tackle these problems, in the following we discuss the empirical set-ups when appropriate. This approach allows us to identify whether the evidence is truly conflicting or rather methodology-dependent. 3.1 Origins of transnational terrorism Economic deprivation One controversial subject is whether terrorism originates in poor economic conditions. Evidence on this issue is conflicting. On the one hand, the findings of Blomberg and Hess (2008a), Azam and Delacroix (2006), Lai (2007) and Azam and Thelen (2008) suggest that successful economic development (measured in real GDP per capita) significantly reduces the genesis of terrorism. On the other hand, empirical results by Krueger and Maleckova (2003), Kurrild-Klitgaard et al. (2006), Basuchoudhary and Shughart (2010), Plümper 6 Such proximity does not necessarily reflect a cause of terrorism, even if it may matter to terrorism. For instance, terrorism may be rooted in poor economic conditions, whereas proximity to terror co-determines the actual level of terrorism (without being a true cause).

8 10 Public Choice (2011) 147: 3 27 and Neumayer (2010), Krueger and Laitin (2008) and Freytag et al. (2008) generally point at only weak links between economic development and terrorism. Furthermore, Kurrild- Klitgaard et al. (2006) find no significant links between income poverty, income inequality and terrorism. In other words, there is only limited evidence to support the hypothesis that economic deprivation causes terrorism (GH1). As we shall see later, poor economic conditions matter less to terrorism once it is controlled for institutional and political factors. The notion that economic deprivation is not a strong catalyst of terrorism is also supported by the micro evidence of Krueger and Maleckova (2003) and Berrebi (2007). Neither study finds a negative relationship between wealth and terrorism. A study using aggregated data by Piazza (2007) for the Middle East for the period 1972 to 2003 returns similar findings. At best, we may hypothesize that a combination of poor economic and institutional conditions may matter to the genesis of terror, e.g., when poverty is accompanied by low opportunities to escape it (as poor institutions constrain political and economic participation). However, such an assumption only stresses that poverty and inequality do not translate into terrorism of their own accord Socio-economic and demographic strain The idea that modernization-related socio-economic and demographic strain leads to transnational terrorism is difficult to operationalize in empirical studies. For lack of better proxies, rough measures such as economic growth, population size and education are used to indicate modernization-related strain. However, they may also constitute elusive indicators. Given these preliminary remarks, we find little convincing support for the idea that various social strains cause terrorism (GH2). First, Kurrild-Klitgaard et al. (2006) and Krueger and Laitin (2008) detect no significant connection between economic growth and terrorism. In other words, the little evidence there is does not support the notion that economic change translates into violence from those who lose out on it. Second, many studies find that more populous countries are more likely producers of transnational terrorism (Krueger and Maleckova 2003; Burgoon 2006; Lai 2007; Plümper and Neumayer 2010; Freytag et al. 2008; Piazza 2008b; Krueger and Laitin 2008). Only in Azam and Delacroix (2006) and Azam and Thelen (2008) is population size insignificant. Such findings may indicate that demographic strain fosters conflict as population size comes with higher demographic stress, so terrorism costs are reduced. Arguably though, population size is a poor proxy for demographic stress. The correlation between population size and terrorism production may simply indicate that terrorism is more likely in larger countries, so there is no independent mechanism behind this correlation. In order to investigate the true effect of modernization-related demographic strain on terrorism, it would be necessary to use proxies that more directly measure underlying concepts (e.g., youth burdens). Third, evidence for education is diverse and needs future research, as we cannot confirm that terrorism is influenced by education. 7 Azam and Thelen (2008) suggest that higher secondary school enrollment discourages terrorism production. Freytag et al. (2008) find a 7 On theoretical grounds, there is no straighforward link between education and terrorism. On the one hand, poorly educated populations should be more susceptible to extremism, thus decreasing the costs of recruitment. On the other hand, terrorists should favor better educated individuals for recruitment, as terrorism success is expected to increase with higher education (Bueno de Mesquita 2005). Micro evidence by Krueger and Maleckova (2003), Berrebi (2007) and Krueger (2008) suggests that human capital is a positive predictor of participation in terrorism.

9 Public Choice (2011) 147: significant effect of the average years of schooling on terrorism which varies with different analytical scopes. In Krueger and Maleckova (2003), the effect of the illiteracy rates on terrorism is negative but insignificant. Kurrild-Klitgaard et al. (2006) find that higher levels of overall education even tend to encourage terrorism, albeit insignificantly. The diversity of results may result from the use of different indicators of education, i.e. education measures Political and institutional order As previously noted, several studies find that economic deprivation leads to terrorism. However, most of these studies do not properly control for institutional settings. Once institutions are taken into consideration, the terror-amplifying effect of poor economic conditions becomes less important. Accounting for economic and institutional development, several studies find that more liberal and democratic countries are significantly less likely to produce transnational terrorism (Krueger and Maleckova 2003; Burgoon 2006; Kurrild-Klitgaard et al. 2006; Plümper and Neumayer 2010; Krueger and Laitin 2008; Piazza 2008b). 8 Basuchoudhary and Shughart (2010) find that more liberal political institutions have tended to discourage transnational terrorism production only since the end of the Cold War. Only the findings of Eubank and Weinberg (2001) andlai(2007) suggest that more democratic countries generate substantially more terrorist activity, arguing that autocratic regimes are better prepared to suppress opposition. These findings indicate that high economic development may work only as a proxy for institutional quality but that there is no independent causal effect of income on terrorism. The role of the broader institutional order is also stressed by Basuchoudhary and Shughart (2010) and Lai(2007), who find that higher levels of economic freedom (e.g., in the form of secure property rights) reduce the production of terrorism. However, Kurrild- Klitgaard et al. (2006) control for the impact of a variety of economic institutions and find no significant association between them and the genesis of terrorism. Regardless of the exact type of institutional order, there may also be effects of government activity on terrorism. Burgoon (2006) finds that welfare policies significantly discourage terrorist activity. 9 Freytag et al. (2008) point in a similar direction, finding that government expenditures are to some extent associated with a reduction in terrorism. The composition and capacity of governments is also found to be associated with terrorism. When governments are more leftist or when they are more capable, the terrorism production in these countries increases (Burgoon 2006). In general, the production of transnational terrorism seems to be rooted in domestic political and institutional orders (GH3). Once institutional factors are taken into account, poor economic conditions do not matter strongly to terrorism. 10 Current evidence suggests that the advent of liberal political institutions reduces terrorism since, e.g., fringe groups are 8 As presented in Table 1, several proxies exist to indicate democracy, freedom and liberalism. We do not differentiate between these proxies as they all indicate a common concept, namely the quality of political institutions. 9 Burgoon (2006) argues that this effect mainly works through a reduction of poverty, inequality and economic insecurity. Given that previous results provide only limited support linking poor economic conditions to terrorism, the argumentation is not too convincing. Perhaps social policies are rather a channel of transaction through which good institutional quality reduces terrorist activity. See Krieger and Meierrieks (2009) for a related analysis of the interaction between terrorism and welfare states in Western Europe. 10 One exception is the study of Blomberg and Hess (2008a) which finds that democratic institutions and high levels of economic development exercise a negative impact on terrorism production. Potentially, the use of a gravity model (instead of count regression models as in most other studies) leads to a different result.

10 12 Public Choice (2011) 147: 3 27 more likely to articulate their demands non-violently (Ross 1993). Democratic institutions may thus reduce conflict by offering cost-efficient non-violent conflict resolution. There is considerably less evidence linking liberal societies to more terrorism production, e.g., by granting certain rights to their citizens that facilitate the terrorists access to communication, the media or other equipment (Ross 1993). Furthermore, evidence alludes to the importance of the broader institutional order in explaining terrorism. Economic institutions and government policies may increase the price of terrorism, e.g., by enabling better access to economic resources and opportunities. The results also indicate that governmental activity may cause more terrorism when governments are powerful, as this produces hostility against them which increases the payoff of terrorism (Sandler and Lapan 1988). That said, the evidence of the effect of institutions on terrorism production is by no means resolved, opening avenues of future research Political transformation and instability Few empirical studies have investigated the relationship between political instability and terrorism (GH4). The findings of Lai (2007) and Piazza (2008b) indicate that political instability (indicated by incidences of civil war and state failure) goes along with more terrorism production. By contrast, Eubank and Weinberg (2001) find that stable democratic countries are the most likely breeding grounds of terrorism, whereas Piazza (2008b) finds that regime durability by itself has no significant impact on terrorism production. As the evidence is limited and contradictory, we cannot conclusively state whether political instability drives terrorism, e.g., as political instability teaches violent behavior, making it less costly (Campos and Gassebner 2009). For the Middle East Piazza (2007) finds that state failure and political instability are linked to increased terrorism production, indicating that a future investigation of such links on a global scale is promising Identity and cultural clash Identity conflicts may also be linked to the genesis of transnational terrorism (GH5). With respect to ethnic identity conflict, Kurrild-Klitgaard et al. (2006) find no significant association between ethnic or linguistic fractionalization and terrorism generation. Piazza (2008b) finds that countries with more homogeneous populations generate less terrorism. With respect to religious identity conflict, Blomberg and Hess (2008a) show that more religiously fractionalized countries tend to generate less transnational terrorism. However, Krueger and Maleckova (2003), Kurrild-Klitgaard et al. (2006) and Krueger and Laitin (2008) find no significant linkages between religious factors and terrorism. In general, the studies find rather weak links between identity factors and terrorism, yet this does not necessarily negate the underlying hypothesis. Rather, it may be a measurement issue, as all studies above measure identity conflict via an invariant concentration index (e.g., ethnic or religious fractionalization) or via a variable indicating simple proportions (e.g., share of Muslim population). Such measures do not necessarily say much about actual tensions that are rooted in ethnic or religious diversity. Only Basuchoudhary and Shughart (2010) consider the genesis of transnational terrorism as a function of a country s (varying) degree of ethnic tensions. Measuring identity conflict in this manner, they find that a higher level of ethnic tension is indeed associated with a higher level of terrorism production. This may imply that the identity hypothesis on conflict roots (GH5) is valid. It is possible that other studies have not arrived at a similar conclusion because they have failed to operationalize the identity-terrorism nexus properly.

11 Public Choice (2011) 147: Global economic and political order Some studies stress the role of international factors in influencing terrorism production. The general idea is that terrorism develops in response to the global economic and political order. Even while it seems intuitive to assume that unfair global conditions morph into terrorism, it is difficult to empirically capture linkages from globalization to terrorism. As for the global economic order, trade openness (the ratio of exports and imports to GDP) is often used to measure the degree of and exposure to economic integration. Evidence by Kurrild-Klitgaard et al. (2006) and Blomberg and Hess (2008a) indicates that higher levels of economic integration significantly reduce the generation of terrorism. Freytag et al. (2008) find that higher levels of trade openness may produce more terror in more-developed countries, while openness is still found to reduce terrorism in less-developed economies. Only Burgoon (2006) finds a positive relationship between trade openness and terrorism, yet it is not significant. These findings indicate that economic integration works salutary rather than threatening, decreasing terrorism support and thus its production. The terrordampening effects of economic integration (e.g., an erosion of funding of terrorist organizations through increased global competition) seem to dominate possible terror-enhancing effects (cf. Mirza and Verdier 2008). However, using measures that better differentiate between the terror-dampening and terror-amplifying effects of economic integration may help to further disentangle the potentially complex relationship between terrorism and the global economic order. As for the global political order, Azam and Delacroix (2006) and Azam and Thelen (2008) find that receiving foreign aid decreases a country s likelihood of producing terrorism. Blomberg and Hess (2008a) find that political integration (WTO membership) also reduces this likelihood. These findings indicate that international political cooperation may reduce transnational terrorism production (cf. Sandler 2005). However, other international political factors may increase terrorism production. Lai (2007) and Piazza (2008b) findthat involvement in interstate war is significantly associated with more terrorism, whereas Burgoon (2006) finds a negative but insignificant relationship. Lai (2007) detects a strong and positive linkage between a country that is a state sponsor of terrorism and the likelihood of it actually generating terrorism. Plümper and Neumayer (2010) find that membership of international alliances may increase the flow of transnational terrorism between two countries, particularly when there is a major power differential between them. In general, these findings suggest that terrorism production significantly interacts with international political factors. 11 The direction of influence seems to be dependent upon the exact impetus of related policies. While cooperative international policies may help to reduce terrorism, hostile and exclusive ones may propel it Contagion Lastly, we want to review whether spatial and temporal proximity also influences the generation of terrorism (GH7). Investigating spatial contagion, Lai (2007), Plümper and Neumayer (2010) and Blomberg and Hess (2008a) find that proximity to other countries suffering from 11 O Brien (1996) and Volgy et al. (1997) also link international factors (e.g., international policy crises, hegemonic capabilities and bipolar conflict) to international terrorism. Although both studies are concerned with the Cold War era, their results still suggest that the importance of the global political order should not be underestimated.

12 14 Public Choice (2011) 147: 3 27 terrorism makes the production of terrorism on own soil substantially more likely. Considering temporal contagion, Lai (2007) shows that past incidences of terrorism predict terrorist activity in present time periods, hinting at the persistence of terrorism. This finding is also supported by the studies of Enders and Sandler (2005) and Piazza (2007) who point towards the autoregressive and infectious nature of transnational terrorism. The sparse empirical evidence thus offers support for the contagion theory of terror production (GH7). 3.2 Targets of transnational terrorism Economic deprivation The mainstream finding on the link from economic deprivation to the target decisions of transnational terrorists (GH1) is that terrorist attacks are associated with higher levels of economic development (Eyerman 1998; Tavares 2004;Blombergetal.2004; Kurrild-Klitgaard et al. 2006; Plümper and Neumayer 2010; BlombergandHess2008a, 2008b; Krueger and Laitin 2008). This is consistent with the theory by Blomberg et al. (2004) who argue that fringe groups resort to terrorism in rich countries (as the most cost-effective way of violent dissent) while they resort to open rebellion in poorer economies. However, some studies do not find significant links between economic development and terrorist attacks (Piazza 2006, 2008a; Sambanis 2008; Dreher and Fischer 2010; Campos and Gassebner 2009; Dreher and Gassebner 2008). This sheds doubt on the mainstream notion that favorable economic conditions attract terrorist strikes, in particular as variables besides per capita income (e.g., income inequality) are normally not robustly linked to terrorism (Li 2005; Kurrild-Klitgaard et al. 2006; Piazza 2006, 2008b; Koch and Cranmer 2007). Even more, Li and Schaub (2004), Li (2005) and Braithwaite and Li (2007) find that high levels of economic development make it less likely for a country to become a target of transnational terrorism. So, while the mainstream notion is that transnational attacks are more likely in richer countries, some findings suggest that caution is advised. Variables indicating economic development may correlate with the true causes of terrorism. For instance, Li (2005), Piazza (2006) and Kurrild-Klitgaard et al. (2006) control for the impact of economic development and institutional factors at the same time, finding that only the latter factors matter to terrorism. This suggests that economic development is associated with high institutional quality (e.g., efficient democratic institutions), where only institutions have a causal impact on terrorist attacks. 12 This leads back to the broader question of whether economic conditions or institutional surroundings attract terrorist strikes. We shall discuss this issue in more detail below Socio-economic and demographic strain Next, we review the evidence linking modernization-related strain to terrorist attacks (GH2). Here, little evidence links economic change (e.g., measured by GDP growth) to terrorist strikes (Drakos and Gofas 2006a; Kurrild-Klitgaard et al. 2006; Piazza 2006; Campos and Gassebner 2009; Krueger and Laitin 2008). Only in Blomberg et al. (2004)are times of recession (when coupled with democratic institutions) associated with an increased 12 Indeed, evidence for poorer world regions by Feldmann and Perälä (2004) for Latin America, and by Testas (2004) and Piazza (2007) for the Middle East indicate that economic factors do not play a dominant role in explaining terrorist attacks.

13 Public Choice (2011) 147: vulnerability to transnational attacks. By contrast, Tavares (2004) finds that higher growth rates are linked to more terrorist attacks in some specifications. Overall, these findings do not suggest that economic change translates into higher terrorist activity. As a corollary, these findings further indicate that economic success exerts no (substantial) independent effect of on terrorist attacks. Turning to population factors, most studies (as with the origins of transnational terrorism) confirm that population size is a strong and positive predictor of transnational attacks (Braithwaite and Li 2007; Burgoon 2006; Campos and Gassebner 2009; Dreher and Fischer 2010; Dreher and Gassebner 2008; Koch and Cranmer 2007; Krueger and Laitin 2008; Li 2005; Li and Schaub 2004; Piazza 2006, 2008a, 2008b; Plümper and Neumayer 2010; Sambanis 2008), with Eyerman (1998) offering complementary but insignificant results. It is unclear whether such a correlation can be genuinely attributed to underlying causal mechanisms, given that population size as a poor proxy for such mechanisms. The correlation may simply reveal that attacks are more likely in more populated countries. Thus, it is more promising to use indicators of truly modernization-related demographic factors to capture related effects. Here, Tavares (2004) demonstrates a terror-enhancing effect of youth burdens. Tavares (2004) and Campos and Gassebner (2009) find that high urbanization rates are associated with more terrorist strikes. Drakos and Gofas (2006a) show that high population density makes terrorist strikes more likely. That is, when using more refined measures of demographic change empirical studies reveal that terrorist strikes are indeed more common when demographic strain is present. Considering the influence of education on terrorist strikes, the findings of Drakos and Gofas (2006a), Kurrild-Klitgaard et al. (2006) and Blomberg and Hess (2008b) do not indicate that education is significantly associated with transnational terrorist attacks. However, all three studies use different measures to indicate educational levels (e.g., secondary school enrollment). Only in Tavares (2004) is a higher illiteracy rate among adult males to some extent linked to a reduction of terrorist activity. As discussed above, the diversity of results may indicate a methodological problem (of measuring education), as the effect of education on terrorist attacks varies with the proxies used. On theoretical grounds, the weak links between education and the targets of terrorism also appear plausible. Most theoretical considerations approach the education-terrorism link from a country of origin perspective. From a target country perspective, such causal mechanism seems to be rather difficult to construct. 13 Overall, we find some evidence for the modernization hypothesis (GH2), in particular when demographic strain associated with modernization (indicated by youth burdens or urbanization) is linked to terrorist attacks. Only marginal evidence is found linking economic change and education to terrorist strikes. As argued before, modernization-related strains are often operationalized by measures such as economic growth, population size and education. These proxies may be considered as improper indicators of such strain, especially as they may also be connected to the economic deprivation (e.g., economic growth) hypothesis Political and institutional order The mainstream finding considering the relationship between the political and institutional order and the probability of a terrorist attack (GH3) is that transnational terrorist attacks are 13 By definition, transnational terrorism has to involve individuals from more than one country. A link from education to terrorism seems plausible when terrorists attack in their homeland but attack a foreign target, so theoretical links from human capital endowments to terrorism are suitable. If, however, terrorists attack outside their homeland, then theory would need to construct a causal link from the educational level of the targeted country (where the attack occurs) and the likelihood of terrorist attacks. Corresponding approaches are not available (and do not appear to be intuitive either).

14 16 Public Choice (2011) 147: 3 27 associated with a liberal and democratic political system (Blomberg et al. 2004; Blomberg and Hess 2008a, 2008b; Braithwaite and Li 2007; Burgoon 2006; Eubank and Weinberg 2001; Li and Schaub 2004; Weinberg and Eubank 1998; Piazza 2008b; Campos and Gassebner 2009). However, some results come to the opposite conclusion, finding that terrorist attacks co-occur with political repression (Piazza 2006; Eyerman 1998; Krueger and Laitin 2008). Other studies find no significant or consistent links between political institutions and the likelihood of terrorist strikes (Drakos and Gofas 2006a; Koch and Cranmer 2007; Piazza 2008a; Dreher and Fischer 2010; Plümper and Neumayer 2010; Sambanis 2008; Tavares 2004; Dreher and Gassebner 2008). Hypothesizing a non-linear relationship between politics and the vulnerability to terror (Kurrild-Klitgaard et al. 2006) may explain the contradictory results outlined above. That is, semi-open polities are most prone to terrorist strikes, presumably as they cannot defend themselves against terrorism by effectively using democratic or repressive tools against terrorism. Also, various components of the political order may interact differently with terrorism. For instance, democratic participation may decrease the likelihood of attacks, whereas government constraints associated with a democratic order (which may constrain counter-terrorism actions) may make terrorist attacks easier (Li 2005). Such complex interactions may also account for the differences in results. Apart from the (unsettled) discussion of which political system is most prone to terrorist strikes, a look at the evidence regarding the broader institutional order yields further interesting results. Higher levels of economic freedom are not associated with fewer terrorist strikes (Kurrild-Klitgaard et al. 2006; Piazza 2008a), which seems to confirm our previous notion pointing at the primacy of institutional over economic factors when explaining terrorist attacks. This notion is supported by further studies. First, once studies simultaneously control for government capacity 14 and economic development (Li and Schaub 2004; Li2005; Koch and Cranmer 2007) there is no independent effect of economic factors on terrorist attacks. Richer states are potentially more capable, meaning that it is then more cost-efficient to use terrorism than to engage in a full-scale civil war (Blomberg et al. 2004). Second, there is evidence that government activities such as decentralization (Dreher and Fischer 2010) and social policies (Burgoon 2006) discourage terrorism. Third, government ideology affiliation also matters. Interestingly, while Burgoon (2006) finds that left-wing governments tend to more successfully discourage terrorist attacks, Koch and Cranmer (2007)find opposing results. In general, this evidence indicates that a closer look at economic and institutional environments may help to further unveil the mechanics of economics, institutions and terrorism. To sum up, the political order (GH3) may influence the attack decisions of transnational terrorists, potentially in non-monotonic ways and through various channels. Independent of the formal political order related factors such as government capabilities, policies and ideological affiliation also seem to matter. Given that economic and institutional development are correlated, most studies indicate that countries are primarily not attacked because they are rich but because they exhibit certain institutional traits; once these traits are controlled for, the effect of economic factors on terrorist attacks becomes rather marginal Political transformation and instability Terrorist attacks may be more common in politically instable environments (GH4). Some studies find that political stability (indicated by regime stability) discourages terrorist at- 14 This variable is measured by a composite indicator capturing, inter alia, income, energy consumption and military manpower. The inclusion of income in this index makes it more difficult to differentiate between economic and political factors when using this variable in empirical analyses.