How Much Does Violence Tax Trade?
43 Pages Posted: 13 Jul 2004
Date Written: June 2004
We investigate the empirical impact of violence as compared to other trade impediments on trade flows. Our analysis is based on a panel data set with annual observations on 177 countries from 1968 to 1999, which brings together information from the Rose  dataset, the ITERATE dataset for terrorist events, and datasets of external and internal conflict. We explore these data with traditional and theoretical gravity models. We calculate that, for a given country year, the presence of terrorism, as well as internal and external conflict is equivalent to as much as a 30 percent tariff on trade. This is larger than estimated tariff-equivalent costs of border and language barriers and tariff-equivalent reduction through GSPs and WTO participation.
Keywords: trade, conflict, terrorism
JEL Classification: E6, H1, H5, D74, O11
Suggested Citation: Suggested Citation