What is the impact of terrorism on trade through higher security at the borders? We set up a theory which shows that the impact goes not only from terrorism to trade; higher trade with a partner might, in turn, increase the probability of terrorism acts and make security measures more costly for...

In this paper, we study the impact of transnational terrorism diffusion on security and trade. We set up a simple theoretical model predicting that the closer a country is to a source of terrorism, the higher the negative spillovers on its trade. The idea is that security measures, which impede...