Abstract:
This thesis describes the impact of terrorism on the economic complexity of countries.
Terrorism wreaks havoc on multiple elements of economies. A discussion of relevant
literature will lend itself to the logic behind two theoretical frameworks that are
employed to help speculate why terrorism may cause changes to country-level economic
complexity. The frameworks, which I developed, are referred to as the Labor Market
Depletion Framework, and the Capital Flight Framework. Four statistical models were
analyzed. First, a comparison of means test was conducted, which indicated no
correlation between economic complexity of countries in which terrorism occurred
compared to those in which it did not occur. Three other multiple regression models were
analyzed, and incorporated different terrorism measures, and all controlled for gross
domestic product (GDP) per capita and region. The terrorism measure for the second
model was a binary measure of terrorism occurrence (yes or no), and showed
counterintuitive results – that in countries where terrorism occurred, economic
complexity values were higher; the measure for the third model utilized the natural
logarithm of a terrorism score (which includes number of people killed, wounded, and
hostages) and excluded outliers, and indicated counterintuitive results by similarly
showing that countries with more terrorism were associated with higher complexity
levels; and the fourth model utilized the natural logarithm of a terrorism score (which
includes number of people killed, wounded, and hostages) and included all available data,
and indicated that countries with more terrorism showed lower levels of economic
complexity, although the relationship is insignificant. The study concludes by discussing
reasoning for the counterintuitive nature of some of the results.
