In a recently completed paper, Javed Younas, former SAI Aman Fellow, constructs a model of examining the trade consequences of terrorism, where firms in trading nations face different costs arising from two distinct types of terrorist risks – domestic and transnational. Most of the research was conducted while Younas was at SAI as a fellow in Fall 2015.
Using dyadic dataset in a gravity model, Younas, with Subhayu Bandyopadhyay, and Todd Sandler, test these predictions for terrorism’s effects on overall trade, exports, and imports, while allowing for disaggregation by primary commodities and manufacturing goods. In general, they found that the detrimental impact of transnational terrorism on various classes of traded commodities is twice that of domestic terrorism. As a general rule, terrorism’s negative influence on trade is greater on imports than on exports. There is also a marked tendency for medium-skilled and high-skilled manufacturing sectors to sustain a greater harm from terrorism than labor-intensive or low-skilled manufacturing sectors.