Fiscal Consequences of Terrorism
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
This paper provides an empirical analysis of how the frequency and severity of terrorism affect government revenue and expenditure during the period 1970–2013 using a panel dataset on 153 countries. We find that terrorism has only a marginal negative effect on tax revenue performance, after controlling for economic and institutional factors. This effect is also not robust to alternative specifications and empirical strategies. On the other hand, we find strong evidence that terrorism is associated with an increase in military spending as a percent of GDP (and a share of total government expenditure). Our estimations reveal that this impact is greater when terrorist attacks are frequent and result in a large number of fatalities. Empirical findings also support the view that public finances in developing and low-income countries are more vulnerable to terrorism than those in countries that are richer and diversified.
Series:
Working Paper No. 2015/225
Subject:
Crime Defense spending Econometric analysis Estimation techniques Expenditure Revenue administration Terrorism Total expenditures
English
Publication Date:
October 23, 2015
ISBN/ISSN:
9781513510965/1018-5941
Stock No:
WPIEA2015225
Pages:
22
Please address any questions about this title to publications@imf.org