The Nonlinear Relationship Between Terrorism and Poverty Byline: Poverty and Terrorism

The Nonlinear Relationship Between Terrorism and Poverty Byline: Poverty and Terrorism Walter Enders and Gary A. Hoover The fact that most terrorist attacks are staged in low income countries seems to support the notion that poverty causes terrorism. Certainly, economic theory suggests that it would be easier for a terrorist group to recruit low-income or unemployed individuals since they have a relatively low opportunity cost of time. Moreover, as argued by Crenshaw (1981), people who believe that their economic prospects have been limited by others might have grievances that could attract them to terrorism. Nevertheless, in their meta study, Gassebner and Luechinger (2011) report that the two robust explanatory variables for terrorism are population and various measures of democratic freedom, but not per capita GDP. Their results from 13.4 million different regressions estimated using various combinations of the 65 variables contained in 43 different studies indicate no significant causal effects between terrorism and per capita GDP. We add to the large and growing literature on the relationship between terrorism and poverty in two ways. First, unlike previous studies, we use a data set that decomposes the number of terrorist acts into domestic and transnational incidents. We show that poverty has a very distinct effect on each type of terrorism. Second, we use split sample and smooth transition regression (STaR) estimation techniques to allow for a nonlinear relationship between terrorism and poverty. When we account for the nonlinearities in the data and distinguish between the two types of terrorist events, we find that poverty has as a very strong influence on domestic terrorism and a small, but significant, effect on transnational terrorism.