Terrorism,crime and public spending: Panel VAR evidence from europe

Within a panel VAR framework and utilizing generalized impulse response and forecast error variance decomposition analysis, we explore the dynamic effects of terrorism and crime on public order and safety spending across European countries during the period 1994–2006. Our findings show that a ‘shock’ in terrorism and/or in crime, significantly increases the subsequent trajectory of public order and safety spending. As a by-product, we find that public spending is ineffective in reducing observed crime or terrorism.     

On the Determinants of Terrorism Risk Concern in Europe

We investigate whether differences in terrorism risk are mirrored on terrorism risk perception across European countries for the period 2003–2007. We find that the average propensity for terrorism risk concern is affected by actual risk levels. Country and individual heterogeneity contribute substantially to the variation of observed risk perception. Singles and individuals with white collar jobs are less likely to mention terrorism as one of the most pressing issues their country faces, while political positioning towards the right makes it more likely to be concerned about terrorism. As far as competing risks are concerned, we find that the likelihood terrorism is mentioned, decreases with spending on pensions as a percentage of GDP being higher. Finally, based on the Bayesian framework, we also examined the formation of terrorism risk perceptions, and decompose the observed country-level time series of terrorism activity into a long- and a short-run component. We concluded that the observed risk perception variation is only explained by the long-term trend of terrorism activity countries face.     

IN SEARCH OF THE AVERAGE TRANSNATIONAL TERRORIST ATTACK VENUE

In this paper we develop an empirical model for transnational terrorist activity for a panel consisting of 139 countries over the period 1985–1998. Essentially, we attempt to sketch the profile of the average terrorist attack venue. Our findings suggest that the terrorist attack venue is, on average, characterized by low economic openness, high demographic stress, and a high level of international disputes. Furthermore, we document a strong regional component suggesting the presence of infectious contagion on a spatial level. Our results also support the presence of addictive contagion captured by a strong autoregressive component in each country’s terrorist activity. Finally, we find a weak statistical link between the level of democracy and terrorist activity, although the level of democracy is a significant determinant of the potential under‐reporting bias of terrorist activity.     

A Note on the Effect of Terrorism on Economic Sentiment

This study documents that unforeseen events like terrorist attacks can be linked to the formation of Economic Sentiment after controlling for sentiment’s economic drivers. By utilizing dynamic panel techniques, the Economic Sentiment Indicator, as well as one of its constituents Consumer Sentiment, for a pan-European panel of 27 countries appear to be negatively influenced by terrorism activity. Moreover, these negative effects are significant only in the post-9/11 era.