What Determines the Global Terrorism?

An Empirical Investigation for Developed

and Developing Countries
Farhat Rasul
Nasir Iqbal

The purpose of this study is to identify the determinants of the

modern terrorism empirically. A number of empirical studies in
literature debate on the social, economic and political factors that
are considered the roots of the terrorism. This study contributes in
literature on this subject by emphasizing the criminological factors
(money laundering, natural resource depletion, state fragility and
the use of internet) of terrorism that bring macro-instability in the
economies. The System GMM based empirical results revealed
that state failure, money laundering and natural resource depletion
adjusted savings (real savings) are the significant determinant of
terrorism in both the developing and developed countries. While,
population growth, inflation and internet users are not a danger
for developed economies rather these factors are the significantly
contributing terrorist activities in the developing countries of the
world. Contrary to the previous studies, the females’ participation
is the labour market is the only factor that can reduce the terrorism
in developing economies.

Introduction

In an era of geopolitical complexity, asymmetric warfare has increased the

threat of terrorism. For more than fifteen years since September 2001, the
international community continues to face the unequal expansion of terrorism
(Anderson, 2012). Except the Central America and the Caribbean region, the
whole world have experienced terrorism (GTI 2017).Since 2002, few researchers
have explained the models for the rise of domestic terrorism. The growing
influence of extremists have increased the complexity of modern terrorism threats
affecting not only for the developing countries but also the international security
(Coggins 2014 and Wither 2016). Following the announcement of President
George W. Bush’s for counter terrorism and war in 2001, many academic scholars
have tried to investigate the "main" factors of domestic and transnational terrorism,
298 Pakistan Vision Vol. 20 No. 2

focusing on the motivations at the individual or group level (Abrahms 2013 and
Coggins 2014).
The phenomenon of poverty and unemployment are the most important
determinant of terrorism discussed in literature. According to this proposal:
"Poverty of resources, with prospects, choices and respect, will contribute to the
development of terrorism" (O’Neill 2002). The economically vulnerable
individuals can increase resentment and despair and support political extremism.
Moreover, poverty often leads towards poverty for underdeveloped, fragile
governance and state failure which hastens fanaticism. Karin von Hippel, are of the
view that particular socioeconomic conditions can explain so-called “enabling
environments,” which obviously increase terrorist inspiration. The countries with
such an environment are Afghanistan, Algeria, Georgia Sudan, Pakistan, Somalia
and Yemen where national and transnational terrorist organizations can find a
vacuum of authority to operate their activities.
The environment contributing to the rise of terrorism include both
international, national and regional political situation, such as political groups and
universities, where many terrorists first explore ideology, revolutionary ideas and
participate in radical groups. Miller, 2006 analysed that violent terrorists’ are
motivated by ideology and money to fulfil their fundamentalism and the needs of
their families. Some studies find the positive relationship between terrorism and
education as more educated people are the more bloody terrorists.
Some other theoretical studies in the literature reveal the fact that the
abundance of natural resources increases the possibility of terrorist activities (Ali,
2015). Also that the armed violence to get control over the natural resources fosters
environmental degradation. According to Shrivastava&Mitroff(2005), the violent
activities to dominate the resources accelerate the indefensible practices for
energy, agriculture, and forestry. Since the terrorism and counterterrorism
activities are depleting the agricultural, forestry and energy production practices,
hence the natural resource adjusted savings1 is a closer proxy to measure the
natural cost of terrorism (Bannon, Collier, &Weltbank, 2003).
Sometimes, eliminating the terrorists worsens the conditions that spawned
them. The more we win the current war, the more we lose the real struggle. We
need to create ecologically sustainable societies. The ecology of terrorism is the
scarcity of natural resources and the unequal distribution and control of resources
that cause poverty and living condition discontent. This discontent spills over into
violence, which, in turn, causes the displacement of more people. The displaced
population often deprives of the control over their lands, minerals, critical natural
resources and livelihoods that stakes the social and political peace. The displaced
population then becomes the sourcesfor the political gains as the crime and
violence are established through assassinations, target killings.
The violation of human rights, alienation and humiliation are sources of
Terrorist acts. Evidence of the perpetration of terrorist violence is the "burning in
feeling of injustice and loss" (Hoffman 1998) and "Despair and uncontrollable
rage" (Stern 2003). A similar understanding can be held between groups who
What Determines the Global Terrorism? An Empirical Investigation for Developed and Developing Countries 299

believe that a political or social order denies their rights, on the basis of social,
linguistic, cultural or ideological differences. The proliferation of violence and
terror caused by hunger, poverty, economic slavery, social and political legitimacy,
risk and extreme insecurity are the components that lead the economies towards
failed states.
The terrorist’s activities always require financial support which are often
financed by money laundering techniques. The unlawful act of money laundering
undermines the efficiency of financial institutions as it does not require the use of
formal financial institutions. It brings financial mutilations, disinvestment, loss of
incomes, political unsteadiness and hence the execution of a nation.
The United Nations Office on Drugs and Crime revealed that the use of the
internet, as a mean of communication, endures the terrorist activities by providing
the terrorist’s a platform to approach the targets easily. Further, terrorists use the
source of internet to propagate, recruit and radicalize their financing, training and
planning (UNODC)2. Tsfati &Weimann, (2002) and Conway, (2006) revealed that
terrorists have more control over their internet sites for fundraising, and recruiting
the new faithful to achieve their political goals. Weimann, (2004), Kaplan (2009)
and Morozov, (2012) found that internet users act as a critical vehicle for the rapid
circulation of news, rumours, and hoaxes regarding terrorist activities.

2. Objective & Significance of the Study

The main objective of this study is to explore the causes of terrorism for
the world economies. A panel of 85 world economies for the period of 2012 to
2016 has been selected and the system GMM estimation technique has been used
to analyse the objective of the study. To illustrate the comparison between
developed and developing countries, this study has segregated the economies
according to the stages of development.
Most analysts in literature focus on the economic, social, and political
aspects, however, little research has been done to explain the further reasons of the
phenomenon. The ever-changing phenomenon of terrorism is out of the bag of
these old hypothesizes as there are many other factors that are responsible to fuel
up the terrorist’s activities. This study is an effort to eliminate this rough gap in the
existing literature. This study go beyond the root causes of terrorism by developing
the explanatory indicators for the growth of the terrorism. The current literature
lacks the criminological causes of terrorism such as natural resource depletion,
state fragility, money laundering and usage of inert net. The lack of criminological
factors in the empirical literature is a major gap in the field of the causes of
terrorism.

3. Review of Literature
This section provides an overview of literature on the components and constituents
of terrorism. First, some theories of terrorism because they are able to guide the
debate about the on to genesis of terrorism. Then the discussion about other
dynamics contributing the terrorism are discussed. Finally, the study describes the
300 Pakistan Vision Vol. 20 No. 2

general limitations of the literature to study the modern determinants of terrorism

and violence.
The theories of social sciences like biological, instinct, drive, cognitive
and social learning all explain the different forms of terrorist violence. According
to the general strain theory, terrorism violence is more life-threatening than
common crime (Victoroff, 2005; Hoffman, 2006; Robison, Crenshaw, & Jenkins,
(2006); Piazza, 2006;Agnew, 2010). Terrorism follows the instrumental and
organizational approaches (Crenshaw, 2010). The instrumental approach is based
on terrorist ideologies3 (Borum, 2010) whereas the organizational approach
explains the inter linkages of terrorist groups having similar objectives. The
theoretical literature explains that terrorism is a tool of political actors and
organisations who deliberately choose violence to change the political and social
conditions (Crenshaw, 2010) for their survival. In addition, social, economic and
political grievances are the major causes of national and transnational terrorism
(Rosenfeld, 2004: Schneider, Bruck, & Meierrieks, 2010; Butler, 2015; Piazza,
2017).
The economic perspectives of terrorism assume that terrorists are the
rational actors who respond to incentives (Caplan, 2006). They maximise their
utility function by adopting terrorist actions, given costs, benefits constraint
(Sandler and Enders 2004). The utility is maximised when marginal benefits are
greater than marginal costs. The benefits of terrorism are derived from the
objectives and goals set by terrorists whereas costs include the opportunity cost of
terrorist violent behaviour and resources (Frey, Luechinger, &Stutzer, 2004). The
country-specific factors which affect the terrorist’s behaviour are also based on
cost and benefit matrices (Schneider, et al., 2010). The typical terrorist supporter
diverges from the rational economic theory which maximizes the utility of
individuals. But active terrorists believe afterlife rewards which narrow their self-
interests or stray them from rational expectations but the suicidal terrorists perhaps
disrupt the both. These outliers believe the popularity of irrational political and
religious beliefs have severe social costs.
The empirical studies in literature evaluate a number of explanatory factors
in determining the growth of terrorism (Kegley 1990; Eyerman 1998; Abadie
2004; Burgoon 2006; Crenshaw 2010; Ghatak 2016; Krueger and Laitin 2007).
However, the importance of one particular factor is overshadowed by another
keeping the constant development and an infinite discipline in the field of
terrorism.
A strand of literature focus on the religious, economic, social and political
aspects of terrorism and the loss caused by terrorist’s violence worsens these
conditions. The more we win the current war, the more we lose the natural
resources. The ecology of terrorism is the scarcity of natural resources and the
unequal distribution and control of resources that cause poverty and living
conditions. This dissatisfaction arises from violence, which in turn causes more
people to be relocated. Resettled residents often lose control of their lands,
minerals, critical natural resources and livelihoods that bring social and political
What Determines the Global Terrorism? An Empirical Investigation for Developed and Developing Countries 301

peace. Finally, crimes and violence are created with murders, political
achievements are aimed at killing targets. Rees, &Westra, (2012) stress on the
need of ecologically sustainable societies by adjusting the natural resource
depletion. Bannon,
Collier, &Weltbank, (2003) have analysed the linkages of terrorism,
conflict, resource depletion and the level of wealth. The study clearly advocates the
fact that civil wars and conflicts reduce the economic wealth by exploiting the
natural resources of the countries. The study composed so many reports that debate
on the preservation of natural resources can reduce or increase the economic
development of the economies.
Burgoon (2006) argued that social welfare policies may reduce
international and domestic terrorism. Social policies can diminish terrorism by
reducing inequality, poverty, economic insecurity and religious-political
extremism. The pooled time series estimation reveal that transnational terrorism is
reduced by the welfare measures. The findings of the study suggest that effective
social policies at home and abroad may help in redistributive or development goals
to combat terrorist violence.
Caruso & Schneider, (2011) have investigated the socio economic
conditions of terrorism and political violence in twelve countries of Europe. The
economic deprivation theory suggests that the high current opportunity cost
terrorism there is less likelihood of an individual’s willingness to involve in
terrorism. Whereas the immiserating modernization argument measures the
opportunity cost future economic rewards which are positively associated with
current terrorist activities. The findings also confirm the fact that terrorism by a
durable and persistent polity is likely to be more brutal in order to gain more
attention.
Some other factors also effect the relationship of terrorism and key economic
indicators have been discussed in the literature are globalization, female labour
force participation and welfare policies.Berrebi & Ostwald, (2013) empirically
found the relationship between terrorism and female labor force participation.
Using the panel data set of 165 countries for the period of 1980-2007. The results
revealed that terrorist attacks decrease female labour force participation and
increase the gender gap between male and female labour force participation. On
the other hand,Robison, Crenshaw& Jenkins, (2006) considered the female
participation in the labour market creates Islamic radicalisms as it is against their
cultural norms. Another study of Robison, (2010) investigated a negative
association of terrorism and women participation in the labour market.
Younas & Sandler, (2017) investigated and empirical test for the support
of the hypothesis of gender imbalance may be conducive for terrorism by using a
panel of 128 developing countries for 1975 to 2011. The results of the study found
that female gender imbalance (higher ratio of women to men) results in more
terrorist attacks in developing countries. But this female gender imbalance does not
affect transnational terrorism in developing and developed countries. Moreover,
302 Pakistan Vision Vol. 20 No. 2

the gender imbalance affects terrorism only when bureaucratic institutions are
weak.

4. Estimation Methodology
In this study the factors of terrorism have been investigated over the period of
2012-2016 for a panel of 85 world economies, segregated into developed and
developing economies.The estimation procedures employed to analyse the panel
data have been discussed in this section. The econometric techniques,fixed or
random effects models to analyse the panel data, are not applicable because the
earlier studies (Mirza, &Verdier, 2008;Gaibulloev, Sandler &Sul, 2013 and
Sandler, 2014) has mentioned the existence of endogeneity in the terrorism and
money laundering and state fragility analysis due to cross country dependence and
counterterrorism measures. Due to uncontrolled heterogeneity, the FEM and REM
estimated parameters will be biased. So the possible way of estimating the
determinants of terrorism models is to move towards instrumental variable
technique. In this study System GMM is applicable because the basic condition for
applying GMM is that number of cross section (N) should be greater than number
time series (T), and in our case number of cross section is eighty five while number
of time series is five. Most of studies highlight the endogeneity problem but it has
not been properly addressed due to lack of suitable instrumental variables. GMM is
the extension of Instrumental Variable (IV) technique.

5. Data Sources & Descriptive Statistics

In this study, the terrorism is measured as “the number of terrorist
incidents registered by a given country yearly”. Population growth is the annual
population growth rate which is based on the all residents in a country regardless
of their legal status except refugees. The ecological loss of resources due to
terrorism has been measured by natural resource depletion adjusted savings are the
net savings minus energy depletion, mineral depletion, net forest depletion,
damage from Carbon dioxide and damage from particulate emissions. The
percentage of female population, above 15 years of age, economically active in the
labour market. The data on the use of internet has been grasped by the percentage
of individuals of the total population who have used internet4 during the last three
months. The state fragility indexmeasures the qualitative and quantitative research
observations faced by a country in terms of political, economic and social
pressures. The Anti-Money Laundering Index is an autonomous annual
classification that evaluates the threat of financial outflows in order to finance the
terrorism activities around the world. It captures the corruption risk, legal and
political risks, public and private official’s accountability, and transparency
indicators under the guidance of BASEL Institute of Governance. The indicators
used to construct the AML Index and State Fragility Index are correlated with each
other. That’s why, we have estimate the two equations separately in order to check
the impact of these two measures for terrorism.
What Determines the Global Terrorism? An Empirical Investigation for Developed and Developing Countries 303

Table 1: Descriptive Summary of the Variables for Full Sample

Variable Obs. Mean Std. Dev. Min Max
Internet Users 585 46.79 29.13 2.2 98.2
Female Labor Force 585 51.39 14.79 14.03 82.33
State Failure Index 585 37.65 13.81 9.4 64.4
Natural Resource Depletion 585 4.041 5.93 0.0004 37.58
Anti-Money laundering 585 5.842 1.219 2.36 8.61

Population Growth 1376 63.46 192.0 .284 1383.28

Terrorism Incidents 683 2.081 1.96 0 8.275

Developing Countries
Internet Users 355 29.06 19.96 2.200 77.00

Female Labor Force 355 50.96 17.40 14.023 82.33

State Failure Index 355 46.12 8.123 25.300 64.40
Natural Resource Depletion 355 5.348 6.676 0.000 37.58

Anti-Money laundering 355 6.155 1.049 3.790 8.55

Population Growth 1088 73.75 214.1 .3370 1383.2

Terrorism Incidents 1088 4.742 .4376 4.60 8.300

Developed economies
Internet Users 200 78.16 12.05 47.5 98.2
Female Labor Force 200 52.44 8.590 19.843 70.86
State Failure Index 200 23.031 8.917 9.4 50.4

Natural Resource Depletion 200 1.7269 3.504 0.09 16.91

Anti-Money laundering 200 5.3462 1.364 2.36 8.61

Population Growth 288 24.60 32.97 .2840 127.34

Terrorism Incidents 272 4.799 .4799 4.605 7.02

Source: Author’s own calculation. Note: all variables are in log form. The data
range is from 2011-2016

For the full sample, the largest average value among the series is of the
female labour force participation (51.39). The lowest mean value is associated with
304 Pakistan Vision Vol. 20 No. 2

natural resource depletion adjusted savings (4.04) which is followed by the average
value of the anti-money laundering and homicide rate (5.44 and 5.84). The average
values of the remaining variables that are of state failure index and internet users’
are37.57 and 46.79 respectively. The lowest standard deviation of these series is of
anti-money laundering index (1.2) and then of natural resource depletion adjusted
savings (5.93) and homicide rate (12.37). While the largest value of standard
deviation is associated with internet users (192.05) followed by military
expenditures (29.13) and female labour force participation (14.03).
The descriptive statistics of the subsamples showed that the average values
of internet users, female labour force and homicide rate for the developed
economies are greater. And the average values of the remaining series are higher
for the developing countries. Turning to the standard deviation, it is observed that
the standard deviation of anti-money laundering (1.3) and state failure index (8.9)
in developed economies are greater than the standard deviation of the same series
for developing economies (1.04) and (8.1). All other series of the developed
economies have lower standard deviation than developing economies.

6. Results and Discussion

6.1. Results and Discussion: Full Sample Economies
The system GMM based results are reported in table 2for the whole
sample due to the issues of reverse causality and endogeneity. A series of
diagnostic tests ensure the accuracy of the results and confirm that the model is
well specified. The Chi-square statistic establishes the adequacy of the estimated
model. The diagnostic test Arellano-Bond (insignificance of AR2) rejects the
presence of second-order serial correlation in the specification. Similarly, the
insignificant p-value of Sargen test for over-identification also accepts the null
hypothesis with the p-value greater than 5 percent to ensure the validity of
instruments used in SYS-GMM.
The system GMM is a dynamic model that introduce the path dependence
through the lagged dependent variable that works for partial adjustments. The
country year is used as a unit of analysis, and the dependent variable is the number
of terrorist incidents in the successive year in that specific country. The estimated
coefficient of lagged incidents of terrorism has a positive and significant impact on
current incidents of terrorism which is consistent with Chenoweth (2006). The
reason for this positive association is that according to the trend; each year
economies experience more incidents of terrorist activities than the previous
period.
Money laundering and terrorist financing is a criminal act which
undermines the economic integrity of the financial institutions, macro stability and
hence growth. The outcomes of the money laundering are market-manipulation,
corruption, fraud and tax evasion that lead to terrorists and illegal activities. These
criminal activities produce financial flows which diverse the resources away from
economically and socially productive uses making the financial sector unstable.
The economics of crime and money laundering claimed that terrorist organization
What Determines the Global Terrorism? An Empirical Investigation for Developed and Developing Countries 305

uses illegal and underground channels to get the financial resources but the anti-
money laundering (AML) policies may restrict them. The Deputy Managing
Director of the IMF as “Effective anti-money laundering and combating the
financing of terrorism regimes are essential to protect the integrity of markets and
the global financial framework as they help to mitigate the factors that facilitate
financial abuse."
Table 2: Determinants of Terrorism: GMM Results (Full Sample)
Variables Coef. P>z Coef. P>z
Model 1 Model 2
Lagged Terrorism
0.712* 0.065 0.840*** 0.00
Anti-Money Laundering Index
-0.133** -0.02
State Failure Index
0.05** 0.025
Population
0.08** 0.013 0.079*** 0.005
Female Labour Force participation
-0.01*** -0.006 -0.08*** 0.00
Inflation
0.048*** 0.0075 0.03** 0.010
Internet User
0.067** 0.012 0.035*** 0.001
Natural Resource Depletion
-0.0419* 0.066 -0.06*** 0.001
Constant
1.845 3.34 -0.59 0.273
Arellano-Bond test AR(2) P-Value
1.32 (1.88) -1.29 (0.298)
Sargen test of overid: restrictions
5.25 (0.812) 10.45 (0.315)
Wald chi^2 Test 503.71 0.003 550.87 0.000
Observations 329 329
Number of idc 85 85
Note: Dependent Variable is No. of Terrorist Incidents. *,** & *** denote
significance level at the 10, 5 and 1% respectively.

The association of AML index with terrorism has a negative and

significant relationship in full sample economies. The positive coefficient is
significant at 5% level of significance implying that one percentage point increase
in anti-money laundering efforts will reduce the terrorism by 0.133 percentage
points. Many World Bank5 and FATF6 reports have identified the role of banking
regulations against money laundering to restrict the financing of terrorists. The
similar findings are found in the studies of (Masciandaro&Portolano, 2002;
Ferwerda& Miller, 2014) who argue that anti-money laundering policies can
significantly reduce crime and terrorist activities.
306 Pakistan Vision Vol. 20 No. 2

The high population growth is considered as a fundamental source for the

evolution of terrorist's activities. The results of table 8.1, showed a positive
significant impact of population on terrorist incidents in full sample economies
implying that an increase in population significantly increases the level of
terrorism. The estimated coefficient suggests that a one percent increase in the
population will increase the terrorist incidents by 0.08 percentage points
significantly. Raza, Shah, & Khan, (2017) and Coccia, (2017) both give evidence
that high population growth is a significant factor of violence, crime, and terrorism
in South Asia and the Middle East.
The participation of woman in the labour force may deviate the trends of
terrorisms. Literature has inconclusive evidence for the association of terrorism
and female labour force participation rate. Berrebi & Ostwald, (2013) investigated
the relationship between female labour force participation rate and terrorism. This
study concludes that female force participation rate is a strong determinant of
terrorism as it enhances the gender gap between male and female workforce.
Contrary to this study, our findings for the full sample economies found a
significant and negative impact of the female labour force on terrorism. The
estimated coefficient showed that one percentage point increase in female
participation in the labour market significantly reduce incidents of terrorism by
0.01 percentage points
The increase in prices forced the vulnerable and deprived persons to
indulge in terrorist activities as it causes the resource distribution to be unequal.
The theories of development economics revealed that inflation increases the
poverty gap by reducing the purchasing power of the low-income groups. Hence,
poor individuals get involved in terrorist acts to produce financial resources for
their families. The positive and highly significant coefficient of inflation showed
that it one percent increase in inflation contributes to terrorist activities by 0.048
percentage points in the case of full sample economies. Our results are similar to
the studies (Schneider, et al., 2010; Shahbaz, & Shabbir, 2011 and Shahbaz, 2013)
who consider inflation as the key factor for social unrest and aggravating the
terrorist attacks.
The state failure index is an essential factor in determining the state of
terrorism. The coefficient of state failure index for the full sample economies is
0.05 that is statistically significant at one percent level of significance. It implies
that the state failure factors such as economic inequalities, internal grievances,
brain drain, and external interventions significantly increasing the terrorist
practices across the world. The findings of the positive association of weak states
and terrorism are consistent with the results of (Piazza, 2006; Tikuisis, 2009 and
Okafor &Piesse, 2017) that argue that weak states are producing the conducive
environment to host the terrorist groups and organizations.
For the full sample economies, we find that the internet has a positive
effect on the growth of terrorism. The value of the estimated coefficient is
significant at one percent level of significance indicating that a one percent
What Determines the Global Terrorism? An Empirical Investigation for Developed and Developing Countries 307

increase in internet users will increase the incidents of terrorism by 0.06

percentage points.
For the natural resource depletion adjusted savings, the results showed a
negative association of terrorism and natural resource depletion (Ali, 2015). The
estimated coefficient of -0.04 is statistically significant at 10 % level of
significance implying that one unit increase in natural resource depletion adjusted
savings will cause 0.04 percentage points to decrease in terrorist's incidents.

7. Results and Discussion: Stages of Development

After discussing aggregate sample results, we now proceed to interpret the

results of subsamples. The reason behind making disaggregated analysis is that full
sample results might be biased due to the diversified nature of developed and
underdeveloped economies in a panel set. It is quite clear that developing countries
such as Iraq, Afghanistan, Pakistan, Nigeria, Egypt, Philippines, Yemen,
Bangladesh, Syria, and Libya are the most affected countries from terrorism. While
according to the GTI (2017), the developed economies have not witnessed a
dramatic increase in the death toll due to terrorism. The diversified nature of the
growth effects of terrorism varies across the developed and under-developed
economies due to the specific differences of the institutional framework

7.1. Results and Discussion: Developing Economies

For accuracy of model and estimation method, Arellano-Bond AR test and
the Hansen test of over-identification restriction of has been calculated. The p-
value of Arellano-Bond AR test and Sargen over-identification test is high enough
to show that instruments are valid and exogenous as a group. Likewise full sample,
for the developing the lag of terrorism indicator, has a positive effect on current
incidents of terrorism. The estimated coefficient is significant at 1%. Similarly, the
coefficient associated with anti-money laundering shows a negative and significant
effect on terrorism. The coefficient is significant at one percent level of
significance implying that more the quality of anti-money laundering regulations,
lower will be the incidents of terrorism.
Similar to the full sample case, the female participation in the labour
market has a negative coefficient at 1 % percent level of significance. It indicates
that female participation in the labour market significantly reducing the incidents
of terrorism by making the families economically sound. The results of the
negative association of female labour market participation and terrorism are similar
to the findings of Robinson, (2010) and Berrebi& Ostwald, (2013).
The coefficients of inflation, internet users, state failure index and natural
resource adjusted savings showed a positive and significant impact on the incidents
of terrorism. These results are similar to the full sample case implying that a one
percent increase in inflation, internet users, and state failure index will bring more
than one percent increase in terrorist incidents.
308 Pakistan Vision Vol. 20 No. 2

Table 3: Determinants of Terrorism: GMM Results (Developing

Countries)
Variables Coef. P>z Coef. P>z
Model 1 Model 2
Lagged Terrorism 0.864*** 0.00 0.951*** 0.00
Anti-Money Laundering Index -0.18** 0.014
State Failure Index 0.034** 0.035
Population 0.039* 0.031
0.026 0.58
Female Labour Force participation -0.01*** 0.00
-0.011** 0.011
Inflation 0.047*** 0.007
0.05*** 0.007
Internet User 0.055** 0.034
0.02 0.688
Natural Resource Depletion 0.053*** 0.002
0.037** 0.034
Constant 1.653 0.043 2.361*** 0.005
Arellano-Bond test AR(2) P-Value -1.56 (0.118) -1.31
0.191
Sargen test of overid: restrictions 10.54 (0.309) 14.77
0.097
Wald chi^2 Test 490.16 0.000 527.99 0.000
Observations 209 209
Number of idc 56 56
Note: Dependent Variable is No. of Terrorist Incidents. Parentheses contain
Standard errors.
*, ** and *** denote significance at the 10, 5 and 1% levels, respectively

The coefficient of population and internet shows a positive association

with terrorism but the results of these indicators are insignificant in Model 2. The
results of internet users’ effect on terrorism are in line with Conway, (2006) who
revealed that the internet is a major tool to propagate the activities of terrorism.
7.2. Results and Discussion: Developed Economies
To check the validity of the estimation model, by following the same
pattern for the full sample and developing economies, Arellano-Bond AR test and
the Hansen test of over-identification restriction have been considered. The p-value
of Arellano-Bond AR test and Hansen test is enough so the model is appropriate.
For the developed economies, all the variables in GMM approach are statistically
insignificant except the female labour force participation and state failure index.
What Determines the Global Terrorism? An Empirical Investigation for Developed and Developing Countries 309

Table 4: Determinants of Terrorism: GMM Results (Developed

Countries)
Variables Coef. P>z Coef. P>z
Model 1 Model 2
Lagged Terrorism
0.45*** 0.00 0.50*** 0.001
Anti-Money Laundering Index
0.06 0.12
State Failure Index
0.05* 0.07
Population
-0.01 0.13 0.026 0.60
Female Labour Force participation
-0.06 0.45 -0.011* 0.07
Inflation
-0.027 0.41 -0.037 0.23
Internet User
-0.008** 0.02 -0.001 0.81
Natural Resource Depletion
-0.04** 0.023 -0.024 0.36
Constant
3.43*** 0.00 1.608** 0.02
Arellano-Bond test AR(2) P-Value
1.03 0.303 1.10 0.273
Sargen test of overid: restrictions
7.66 0.569 11.34 0.253
Wald chi^2 Test 25.254 0.003 66.99 0.000
Observations 104 104
Number of idc 26 26
Note: Dependent Variable is No. of Terrorist Incidents. Parentheses contain
Standard errors.
*, ** and *** denote significance at the 10, 5 and 1% levels, respectively
The coefficient of female labour force participation is positive and
statistically significant at 10 % level of significance imply that one unit increase in
the female labour force participation will increase the level of terrorism by 0.11
percentage points. We support these results through the male and female
employment disparities that aggravate the male labour force for the crime. Similar
findings have been revealed by Kandiyoti, (2016) who found a positive
relationship between terrorist attacks and female employment in Turkey. The
positive but insignificant coefficient of anti-money laundering index showed that
the act of money laundering to finance the illegal activities is not a major issue of
the developed countries and our results are supported by Aluko&Bagheri, (2012)
who argue that money laundering hinders economic growth of the developing
countries as compare to developed countries. The similar results are for the
population growth of the developed countries as the results are insignificant. The
results of natural resource adjusted savings showed a negative and significant
310 Pakistan Vision Vol. 20 No. 2

impact on terrorism which indicates that one percent increase in real savings can
reduce the terrorist activities. The coefficient of internet user’s is also negative and
significant consistent with Dreyfuss, (2017) implying that internet usage does
not cause terrorism in the developed countries.
For the developed countries, this study finds a positive coefficient of state
failure index (SFI) for terrorism that is statistically significant at a ten percent level
of significance. The findings of the positive association of state failure index (SFI)
and terrorism for the developed countries are aligned with the results of (Tikuisis,
2009 and Okafor &Piesse, 2017) that support the positive relation between SFI and
terrorism in those countries lacking displaced people, group grievances, security
apparatus, and economic development.

8. Conclusion & Policy Implications

This chapter conclude the discussion with the evidence that the weak states
are the most significant determinant of terrorism both in developed and
developing countries as well as in full sample economies. Whereas, female labour
force participation rate and AML index can reduce terrorism in developing and
developed countries. In the developing countries of the world, increase in inflation,
population, internet users and natural resource depletion adjusted savings are the
factors which increase the inclination of the terrorist activities revealed the fact that
terrorist groups communicate and propagate their activities via internet. The
insignificant effects of the use of the internet for terrorism in developed countries
show that terrorist activities are not supported by internet. Instead there are some
other meaningful sources through which they contact each other.

The empirical results of this section imply that governments of the developed and
developing countries should reduce the economic inequalities, internal grievances,
homicide rate, brain drain, and external interventions in order to avoid the state
failures. The implementation of audit controls over the illegal use of internet (with
the help of international cooperation) can limit the terrorist contents
(radicalization, propaganda, planning, recruiting and training). The developing
economies have to strengthen the financial markets by imposing the anti-money
laundering rules and stable inflation rate to limit the menace of terrorism.
What Determines the Global Terrorism? An Empirical Investigation for Developed and Developing Countries 311

Notes and References

1
Adjusted Savings = Net National Saving – Energy Depletion – Mineral Depletion
– Net Forest Depletion – Damage from Carbon dioxide – Damage from Particulate
Emissions.
2
The use of the Internet for terrorist purposes, UNO on Drugs and Crime In
collaboration with the United Nations Counter-Terrorism Implementation Task
Force, Report, 2012
3
Most of the terrorist follow political, economic, religious or strategic ideologies.
4
The Internet can be used via a computer, mobile phone, personal digital assistant,
games machine, digital TV etc.
5
Reference Guide to Anti-Money Laundering and Combating the Financing of
Terrorism
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2011
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6
The Financial Action Task Force (FATF) has been established as a mechanism to
identify financial criminal activities both at the national and international level.

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Appendix (A); Sources of Data Series

Variables Source
Terrorism incidents GTD
Anti-money Laundering Index BASEL
Population Growth WDI
Female Labour Force participation WDI
Inflation (CPI) WDI
State Failure Index 0.008
Internet User WDI
Natural Resource Depletion Adjusted savings WDI