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  • Cited by 54
  • Print publication year: 2008
  • Online publication date: July 2010

1 - Economic Consequences of Terrorism in Developed and Developing Countries: An Overview

    • By Todd Sandler, Robert R. and Katheryn A. Dockson Professor of International Relations and Economics, University of Southern California; Vibhooti Shukla Professor of Economics and Political Economy, University of Texas, Dallas, Walter Enders, Professor of Economics and Lee Bidgood Chair of Economics and Finance, University of Albama
  • Edited by Philip Keefer, The World Bank, Norman Loayza, The World Bank
  • Publisher: Cambridge University Press
  • DOI:
  • pp 17-47


Terrorism is the premeditated use or threat of use of violence by individuals or subnational groups to obtain a political or social objective through the intimidation of a large audience, beyond that of the immediate victim. Although the motives of terrorists may differ, their actions follow a standard pattern, with terrorist incidents assuming a variety of forms: airplane hijackings, kidnappings, assassinations, threats, bombings, and suicide attacks. Terrorist attacks are intended to apply sufficient pressures on a government so that it grants political concessions. If a besieged government views the anticipated costs of future terrorist actions as greater than the costs of conceding to terrorist demands, then the government will grant some accommodation. Thus, a rational terrorist organization can, in principle, achieve some of its goals more quickly if it is able to augment the consequences of its campaign. These consequences can assume many forms, including casualties, destroyed buildings, a heightened anxiety level, and myriad economic costs. Clearly, the attacks on September 11, 2001, (henceforth, 9/11) had significant costs that have been estimated to be in the range of $80 to $90 billion when subsequent economic losses in lost wages, workman's compensation, and reduced commerce are included (Kunreuther et al. 2003). The cumulative costs of 9/11 were a small percentage of U.S. gross domestic product (GDP), which exceeded $10 trillion.

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