The root causes of terrorism might not be poverty and lack of education, as many believe. Rather, the lack of civil liberties, political rights and the rule of law might be more influential.Terrorism

Craig P. Aubuchon

Javed Younas

Subhayu Bandyopadhyay

English

Research Papers in Economics

E
ach year, the U.S. State Department 
publishes Country Reports on Terror-
ism, which highlights current strategies, 
outcomes and casualties from U.S. counter-
terrorism efforts.  The 2008 report high-
lights the growing trend in terrorist attacks 
abroad, including the September attack 
against the U.S. Embassy in Yemen that 
killed 18 people.  The continued incidence 
of terrorism prompts us to consider its root 
causes.  It is popular to single out poverty or 
lack of education as major factors.
1  Recent 
economic literature, however, points more 
toward civil liberties, political rights and the 
rule of law as far greater factors.
Measuring Terrorism:  
What Counts and How Much?
Measuring the incidence and type of ter-
rorism is controversial.  First, it is important 
to distinguish between domestic and trans-
national terrorism.  The latter is generally 
considered any event that involves citizens 
or territories of more than one country, 
while the former is a local act carried out by 
citizens of the target country.  (The attack 
in New York City on 9/11 is a prominent 
example of transnational terrorism, where 
foreign citizens carried out the attack.  The 
bombing by Timothy McVeigh in Okla-
homa City in April 1995 is an example of 
domestic terrorism.)  It is also important to 
consider whether the number of incidents 
or the magnitude of events is more impor-
tant.  This is brought out very clearly in the 
accompanying graphs reproduced from the 
work of economists Graham Bird, S. Brock 
Blomberg and Gregory Hess.
2  While Figure 1 
shows a drop-off in the number of terrorist 
incidents, Figure 2 shows a rise in the num-
ber of deaths per incident over time.  This 
demonstrates that terrorists are using more 
lethal methods and weapons.
Poverty and Terrorism
A study by economists Alan Krueger 
and Jitka Maleckova considers the influ-
ence of poverty and education on terrorism.  
Surprisingly, they find no evidence that 
reducing poverty or improving education 
would “meaningfully reduce international 
terrorism.” 
3  The authors reached their 
conclusion based on evidence from three 
sources: Hezbollah militant activities in the 
Gaza/West Bank region from 1998 to 2000, 
individual profiles from members of Israeli 
Jewish extremists in the late 1970s and from 
a cross-country analysis using data from the 
U.S. State Department.  Interestingly, the 
authors found that within the context of the 
West Bank/Palestinian conflict, individu-
als who engaged in terrorism were better 
educated and economically more affluent 
than the average citizen.  This apparently 
paradoxical result may be better understood 
when one realizes that individuals’ incomes 
may correlate with their abilities.  To suc-
ceed in terrorist attacks in a heavily guarded 
environment (like Israel), one needs a 
relatively high degree of skill and ability.  
Therefore, it is natural for leaders of the ter-
rorist groups to choose more-able volunteers 
so that a planned attack is more likely to be 
successful.
Another study, by Krueger and economist 
David Laitin, analyzes the characteristics 
of nations from which terrorism originates 
and of target nations.
4  They considered 
incidents of terrorism where the target and 
source nations of terrorism were distinct. 
They found that source nations of terror-
ism were more likely to suffer from a lack 
of civil liberties and that economic condi-
tions (as captured by GDP per capita) in 
these nations had no statistically significant 
relationship with terrorism.
5  On the other 
hand, they find that nations with high GDP 
per capita were more likely to be targets of 
terrorism.  A 2006 paper by Harvard econo-
mist Alberto Abadie also found that the risk 
of terrorism was not significantly higher for 
poorer nations once one accounted for other 
country-specific characteristics such as the 
level of political freedom.
6  
The study by Bird and his co-authors 
comes to a different conclusion.  They found 
that net exporters of terrorism were poorer 
nations, while terrorist targets (effectively, 
the importers of terrorism) were rich.  
Based on this observation, they suggest that 
economic factors, among others, do have a 
role in explaining both the origin and the 
location of terrorist acts.
The Role of Political and Civil Rights
The aforementioned study by Abadie 
focuses on the role that political freedom 
plays in spurring terrorism.
7  By studying 
different nations, he finds that the incidence 
of terrorism is highest in nations with  
intermediate levels of political freedom.  
Highly democratic and also highly auto-
cratic regimes both tend to experience  
less terrorism.  
A recent working paper by St. Louis 
Federal Reserve economist Subhayu Ban-
dyopadhyay and co-author Javed Younas 
explores the link between terrorism and 
political and civil rights in developing 
nations, using a sample of 125 countries.  
Disaggregating the data between domestic 
and transnational terrorism, they found that  
it was only domestic terrorism that was 
Increasing Political Freedom  
May Be Key To Reducing Threats
t e r r o r i s m
By Craig P. Aubuchon, Subhayu Bandyopadhyay and Javed Younas
© Robin baRtholick/coRbis
10   The Regional Economist  |  October 2009e n dno t e s
  1  For example, Chapter 5.7 of the 2008 Country 
Reports on Terrorism states the implicit 
assumption that poverty can lead to terrorism: 
“High unemployment and underemployment, 
often a result of slow economic growth, are 
among the most critical issues in predomi-
nantly Muslim countries.”
  2  See Bird et al.
  3  See Krueger and Maleckova (2003).
  4  See Krueger and Laitin (2007).
  5  Admittedly, many nations are both sources 
and targets of terrorism; the focus of this 
study, however, was on transnational inci-
dents where the sources and targets differed.
  6  See Abadie.
  7  A common measure of political and civil rights 
comes from Freedom House, a nonprofit, non-
partisan organization.  Freedom House defines 
civil liberties as the protection of fundamental 
individual rights against coercion and interfer-
ence by the state; political rights include the 
right to participate in the political process and 
having freedom of speech.  On a scale of 1 to 7,  
Freedom House measures a country’s level 
of political and civil rights separately, with 1 
being free and 7 being not free, for a combined 
score of 14.  For example, in 2005 the United 
States scored a 1 in both political and civil 
liberties; Sudan scored a 7 on both accounts.  
Examples of countries in-between include 
Argentina (2 and 2), Thailand (3 and 3), and 
Afghanistan (5 and 5).
  8  Chapter 5 of the RAND MIPT publication, 
“More Freedom, Less Terror?  Liberalization 
and Political Violence in the Arab World” 
presents a detailed look at the political climate 
and terrorist activity in Saudi Arabia from 
1990 to the present.
R e f e R e nc e s
Abadie, Alberto.  2006.  “Poverty, Political Free-
dom, and the Roots of Terrorism.”  American 
Economic Review: Papers and Proceedings, 
2006, Vol. 96, No. 2, pp. 50–56.
Bandyopadhyay, Subhayu; Younas, Javed.  “Does 
Democracy Reduce Terrorism in Developing 
Nations?”  Federal Reserve Bank of St. Louis 
Working Paper 2009-023A.  Available at: http://
research.stlouisfed.org/wp/2009/2009-023.pdf.
Bird, Graham; Blomberg, S. Brock; and Hess, 
Gregory D.  “International Terrorism: Causes, 
Consequences and Cures.”  The World 
Economy, 2008, Vol. 31, No. 2, pp. 255-74.
Kaye, Dalia Dassa; Wehrey, Frederic; Grant, 
Audra K; and Stahl, Dale.  More Freedom, Less 
Terror?  Liberalization and Political Violence 
in the Arab World.  RAND Corp.: Santa 
Monica, Cal. 2008.  See www.rand.org/pubs/
monographs/MG772/.
Krueger, Alan B; Laitin, David D.  “Kto Kogo?: 
A Cross-Country Study of the Origins and 
Targets of Terrorism.”  NBER Working Paper, 
2007.  See www.krueger.princeton.edu/ter-
rorism4.pdf
Krueger, Alan B; Maleckova, Jitka.  “Education, 
Poverty and Terrorism: Is There a Causal 
Connection?”  Journal of Economic Perspec-
tive, 2003, Vol. 17, No. 4, pp. 119-44.
RAND-MIPT Terrorism Incidents Database, 2007.
See www.rand.org/ise/projects/terrorism-
database/. 
U.S. Department of State.  Country Reports on 
Terrorism 2008.  See www.state.gov/s/ct/rls/
crt/2008/index.htm.
related to the level of political and civil 
rights.  Along the lines of Abadie, they 
found that a transition from autocracy to 
democracy might be associated with an 
initial increase in terrorism.
These studies suggest that nations may 
need to be patient on the path to democracy.  
Giving more political rights to citizens may 
not immediately reduce terrorism in that 
country.  An interesting example was the 
2003 terrorist attacks against Saudi civilians 
by an Al Qaida affiliate, which occurred 
against the backdrop of political reform, 
including the announcement of municipal 
council elections in October 2003.
8
Counterterrorism Policy:  
A Comprehensive Approach
Because of the highly emotional and 
traumatizing impact of terrorism, it is 
important to take a measured and thought-
ful look at counterterrorism policy.  While 
still in its early stages, research suggests that 
economic status or lack of education may 
not be the most important factors spurring 
terrorism.  The evidence suggests a closer 
relationship with the lack of political or civil 
liberties in origin nations, perhaps because 
frustrations with existing regimes make 
people more readily rely on violence.  These 
findings suggest a multipronged approach 
to counterterrorism policy; military power 
as well as economic assistance may help the 
source nations of terrorism to achieve effec-
tive reform.  All the studies suggest that, in 
the long run, political reforms that confer 
rule of law, civil liberties and political rights 
to developing nations will be the best way to 
reduce incidents of global terror. 
Subhayu Bandyopadhyay is an economist at 
the Federal Reserve Bank of St. Louis.  Craig P. 
Aubuchon is a research associate at the Bank.  
Javed Younas is assistant professor of economics 
at the American University of Sharjah, United 
Arab Emirates.  For more on Bandyopadhyay’s 
work, see http://research.stlouisfed.org/econ/
bandyopadhyay.
Transnational Terrorist Incidents, 1968-2003
figure 1 
1968 1973   1988 1978 1983   1993   1998   2003
700
600
500
400
300
200
100
0
I
N
C
I
D
E
N
T
S
 
P
E
R
 
Y
E
A
R
YEAR
1968 1973   1988 1978 1983   1993   1998   2003
10
9
8
7
6
5
4
3
2
1
0
D
E
A
T
H
S
 
P
E
R
 
I
N
C
I
D
E
N
T
 
E
A
C
H
 
Y
E
A
R
YEAR
Deaths Per Transnational Terrorist Incident, 1968-2003
figure 2 
soURcE: Graham bird, s. brock blomberg and Gregory D. hess
The Regional Economist  |  www.stlouisfed.org   11

Increasing political freedom may be key to reducing threats

http://stlouisfed.org/publications/pub_assets/pdf/re/2009/d/terrorism.pdf

Increasing political freedom may be key to reducing threats

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics