Terrorism and Local Economic Development

Scientific We study the local economic effects of terror incidents at a sub-national level for a global set of developed and developing countries. Using night lights as a proxy for local economic activity, we identify that one additional fatality per attack results in a drop of 0.14 percent in economic development, on average. The effects are observed for up to a 15-kilometer radius from the incident location. The attacks targeted at business infrastructure and the police/military bases have the most detrimental effects. The group of countries from the Middle-Eastern and Northern African region, South Asia, and Sub-Saharan African regions suffer the most. Using individual-level data from four countries as a case study, we show that terrorism affects individual well-being and lowers the desire to have additional children among women. It is also evident that terrorism is detrimental to child health in the treated districts. Findings survive a battery of robustness tests.