Faculty of Business Seminar Series / Alpaslan Akay

Title: Everybody’s a Victim? Global Terror and Well-Being

Abstract: Terror has become a global issue. Terror acts perpetuated by religious, nationalist or political groups at any corner of the globe can propagate rapidly through the media or through economic channels (such as stock markets). The cumulated welfare loss experienced by world citizens may be large. Using a unique identification approach based on the daily terror information (71,000 incidences) and six high-quality panel datasets from Western countries observed between 1994 and 2013 (about 750,000 observations), we show that the well-being of citizens is negatively influenced by the global terror fatalities and incidences. The effect is highly robust with respect to estimators and terror measures, and also highly stable across countries. We find that people adapt to the global terror completely within a week. A significant portion of the effect is explained by three interrelated channels including distance (e.g., physical, cultural, religious, and genetic), exposure (e.g., population structure, media, migration, tourism, and social life), and temporal shocks and economic fluctuations (e.g., simultaneous environmental shocks and daily fluctuations of global and national financial markets). The global cost of terror is about 2% of the GDP per capita or almost same as the average per capita military expenditures among the Western countries. The paper discusses the economy-political implications of the results.

Place : Meeting Room AB2-345