Economic Globalization and Transnational Terrorism

The effect of economic globalization on the number of transnational terrorist incidents within countries is analyzed statistically, using a sample of 112 countries from 1975 to 1997. Results show that trade, foreign direct investment (FDI), and portfolio investment have no direct positive effect on transnational terrorist incidents within countries and that economic developments of a country and its top trading partners reduce the number of terrorist incidents inside the country. To the extent that trade and FDI promote economic development, they have an indirect negative effect on transnational terrorism.