Income and Terrorism: Insights From Subnational Data

Abstract

This paper first introduces a theoretical formalization connecting a polity’s income level to terrorism. Our framework can accommodate different underlying assumptions about individual- and society-level grievances, yielding competing hypotheses. We then construct a panel database to study terrorism for 1527 subnational regions in 75 countries between 1970 and 2014. Results consistently imply an inverted U-shape that remains robust to incorporating a comprehensive set of region-level covariates, region- and time-fixed effects, as well as estimating an array of alternative specifications. The threat of terrorism systematically rises as low-income polities become richer, peaking at GDP/capita levels of ≈ US$12,800 (in constant 2005 PPP US$), but then falls consistently above that level. This pattern emerges for domestic and transnational terrorism alike. While peaks differ by perpetrator ideology, the inverted U shape also prevails across ideology-specific subsamples. In sum, alleviating poverty may first exacerbate terrorism, contrary to much of the proposed recipes advocated since 9/11.