The role of inclusive development and military expenditure in modulating the effect of terrorism on governance

Asongu, Simplice and Nwachukwu, Jacinta and le Roux, Sara (2018): The role of inclusive development and military expenditure in modulating the effect of terrorism on governance. Forthcoming in: Journal of Economic Studies

Abstract

Purpose- The study investigates the role of inclusive human development and military expenditure in modulating the effect of terrorism on governance.

Design/methodology/approach- It is based on 53 African countries for the period 1998-2012 and interactive Generalised Method of Moments is employed. Six governance indicators from the World Bank and two terrorism variables are used, namely: domestic and transnational terrorism dynamics.

Findings- The following main findings are established. There is a negative net effect on governance (regulation quality and corruption-control) when inclusive human development is used to reduce terrorism. There is a positive net impact on governance (“voice and accountability” and rule of law) when military expenditure is used to reduce domestic terrorism.

Originality/value- We have complemented the sparse literature on the use of policy variables to mitigate the effect of policy syndromes on macroeconomic outcomes.

• Item Type: MPRA Paper
• Language: English
• Keywords: Terrorism; Inclusive development; Governance; Africa
• Subjects: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation, Validation, and Selection; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F42 - International Policy Coordination and Transmission; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O38 - Government Policy; P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P37 - Legal Institutions ; Illegal Behavior

References

Abadie, A., (2006). “Poverty, Political Freedom and the Roots of Terrorism.” American Economic Review, 95 (2), pp. 50-56.

Ajide, K. B, & Raheem, I. D., (2016). “Institutions-FDI Nexus in ECOWAS Countries”. Journal of African Business, 17(3), pp. 319-341.

Alfa-Wali, M., Sritharan, K., Mehes, M., Abdullah, F., & Rasheed, S., (2015). “Terrorism-related trauma in Africa, an increasing problem”, Journal of Epidemiology and Global Health, 5(2), pp. 201-203.

Asongu, S. A., and Amankwah-Amoah, J., (2018). “Mitigating capital flight through military expenditure: Insight from 37 African countries”, Research in International Business and Finance, 45(October), pp. 38-53.

Andrés, A. R., Asongu, S. A., & Amavilah, V. H. S., (2015). “The Impact of Formal Institutions on Knowledge Economy”, Journal of the Knowledge Economy, 6(4), pp. 1034-1062.

Arellano, M., & Bond, S., (1991). “Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations”. The Review of Economic Studies, 58(2), pp. 277-297.

Arellano, M., & Bover, O., (1995). “Another look at the instrumental variable estimation of error-components models”, Journal of Econometrics, 68(1), pp. 29-52.

Argomaniz, J., (2015). “European Union responses to terrorist use of the Internet”, Cooperation and Conflict, 50 (2), pp. 250-268.

Asongu, S. A., (2012). “Government quality determinants of stock market performance in African countries”, Journal of African Business, 13(3), pp. 183-199.

Asongu, S. A., (2014). “Globalization (fighting), corruption and development : How are these phenomena linearly and nonlinearly related in wealth effects?”, Journal of Economic Studies, 41(3), pp. 346-369.

Asongu, S. A., (2015). “On Taxation, Political Accountability and Foreign Aid: Empirics to a Celebrated Literature”, South African Journal of Economics, 83(2), pp. 180-198.

Asongu, S. A., (2016). “Determinants of Growth in Fast Developing Countries: Evidence from Bundling and Unbundling Institutions”, Politics & Policy, 44(1), pp. 97-134.

Asongu, S. A., (2017). “Knowledge Economy Gaps, Policy Syndromes and Catch-up Strategies: Fresh South Korean Lessons to Africa”, Journal of the Knowledge Economy, 8(1), pp. 211–253.

Asongu, S. A., (2018). “ICT, openness and CO2 emissions in Africa”, Environmental Science and Pollution Research, 25(10), pp. 9351–9359.

Asongu, S. A., & De Moor, L., (2017). “Financial globalisation dynamic thresholds for financial development: evidence from Africa”, The European Journal of Development Research, 29(1), pp. 192–212.

Asongu, S. A., Efobi, U., & Beecroft, I., (2015). “Inclusive Human Development in Pre-Crisis Times of Globalisation-Driven Debts”, African Development Review, 27(4), pp. 428-442.

Asongu, S. A., & Nwachukwu, J. C., (2016a). “The Role of Lifelong Learning in Political Stability and Non-violence: Evidence from Africa”, Journal of Economic Studies, 43(1), pp. 141-164.

Asongu, S. A, & Nwachukwu, J. C., (2016b). “Foreign aid and governance in Africa”, International Review of Applied Economics, 30(1), pp. 69-88.

Asongu, S. A., & Nwachukwu, J. C., (2017a). “Quality of Growth Empirics: Comparative Gaps, Benchmarking and Policy Syndromes”, Journal of Policy Modeling, 39(5), pp. 861-882.

Asongu, S. A, & Nwachukwu, J. C., (2017b). “The Impact of Terrorism on Governance in African Countries”, World Development, 99(November), pp. 253-270.

Asongu, S. A., Tchamyou, V. S., Asongu, N., & Tchamyou, N. P., (2017a). “The Comparative African Economics of Inclusive Development and Military Expenditure in Fighting Terrorism”. Journal of African Development, 19(2), pp. 77-91.

Asongu, S. A., Le Roux, S., & Biekpe, N., (2017b). “Environmental degradation, ICT and inclusive development in Sub-Saharan Africa”, Energy Policy, 111(December), pp. 353-361.

Asongu, S. A., Tchamyou, V. S., Minkoua, N, J. R., Asongu, N., & Tchamyou, N. P., (2018a). “Fighting terrorism in Africa: Benchmarking policy harmonization”, Physica A: Statistical Mechanics and its Applications, 492(February), pp. 1931-1957.

Asongu, S. A., Tchamyou, V. S., Asongu, N., & Tchamyou, N. P., (2018b). “Fighting terrorism in Africa: evidence from bundling and unbundling institutions”, Empirical Economics. DOI: 10.1007/s00181-017-1378-3.

Baltagi, B. H., (2008). “Forecasting with panel data”, Journal of Forecasting, 27(2), pp. 153-173.

Bandyopadhyay, S., Sandler, T., & Younas, J., (2014). “Foreign direct investment, aid, and terrorism”, Oxford Economic Papers, 66(1), pp. 25-50.

Bang, J. T., & Mitra, A. (2011). “Brain drain and institutions of governance: Educational attainment of immigrants to the US 1988–1998”. Economic Systems, 35(2011), pp. 335-354.

Bass, L., (2014). “What Motivates European Youth to Join ISIS?”, Syria Comment, http://www.joshualandis.com/blog/push-factors-helping-isil-recruitment-loretta-bass/ (Accessed: 01/12/2015).

Basuchoudhary, A., & Shughart, W.F. (2010). “On ethnic conflict and the origins of transnational terrorism”. Defence and Peace Economics, 21(1), pp. 65-87.

Baten, J., & Mumme, C. (2013). “Does inequality lead to civil wars? A global long-term study using anthropometric indicators (1816–1999)”. European Journal of Political Economy, 32(December), pp. 56-79.

Beck, T., Demirgüç-Kunt, A., & Levine, R., (2003), “Law and finance: why does legal origin matter?”, Journal of Comparative Economics, 31(4), pp. 653-675.

Benmelech, E., Berrebi. C., & Klor. E. F., (2012). “Economic Conditions and the Quality of Suicide Terrorism.” Journal of Politics, 74(1), pp. 113-128.

Berrebi, C., & Klor, E., (2006). “On Terrorism and Electoral Outcomes”. Journal of Conflict Resolution, 50(6), pp. 899-925.

Blomberg, S. B., Hess, G. D., & Weerapana, A., (2004). “Economic Conditions and Terrorism.” European Journal of Political Economy, 20(2), pp. 463-478.

Blundell, R., & Bond, S., (1998). “Initial conditions and moment restrictions in dynamic panel data models”, Journal of Econometrics, 87(1), pp. 115-143.

Boateng, A., Asongu, S. A., Akamavi, R., & Tchamyou, V. S., (2018). “Information Asymmetry and Market Power in the African Banking Industry”, Journal of Multinational Financial Management, 44(March), pp. 69-83.

Bond, S., Hoeffler, A., & Tample, J., (2001). “GMM Estimation of Empirical Growth Models”, University of Oxford, Oxford.

Boulianne, S., (2009). “Does Internet Use Affect Engagement? A Meta-Analysis of Research”, Political Communication, 26(2), pp. 193-211.

Brambor, T., Clark, W. M., & Golder, M., (2006). “Understanding Interaction Models:Improving Empirical Analyses”, Political Analysis, 14(1), pp. 63-82.

Bueno de Mesquita E., (2005). “Quality of Terror.” American Journal of Political Science, 49 (3), pp. 515-530.

Caruso, R., & Schneider, F., (2011). “The socio-economic determinants of terrorism and political violence in Western Europe (1994–2007)”. European Journal of Political Economy, 27(S1), 37- 49.

Cederman, L.-E., Weidman, N.B., & Gleditsch, K.S. (2011). “Horizontal inequalities and ethnonationalist civil war: A global comparison”. American Political Science Review, 105(3), pp. 478-495.

Cheung, H.Y. & Chan, A.W.H., (2008. “Corruption across countries; impacts form education and cultural dimensions”, The Social Science Journal, 45(2), pp. 223-239.

Choi, S-W., (2010). “Fighting Terrorism through the Rule of Law?”, The Journal of Conflict Resolution, 54(6), pp. 940-966.

Choi, S-W., & Salehyan , I., (2013). “No Good Deed Goes Unpunished: Refugees, Humanitarian Aid, and Terrorism”, Conflict Management and Peace Sciences, 30(1), pp. 53-75.

Clavarino, T., (2014). “Africa, the new outpost of terrorism”, RT op-edge. https://www.rt.com/op-edge/180996-africa-outpost-islamic-terrorism/ (Accessed: 20/01/2016).

Dewan, S., & Ramaprasad, J., (2014). “Social media, traditional media and music sales”, MIS Quarterly, 38(1), pp. 101-128.

Diamond, L., (2010). “Liberation Technology”, Journal of Democracy, 21(3), pp. 69-83.

Efobi, U., & Asongu, S. A., (2016). “Terrorism and capital flight from Africa”, International Economics, 148(December), pp. 81-94.

Efobi, U., Asongu, S., & Beecroft, I., (2015). “Foreign Direct Investment, Aid and Terrorism: Empirical Insight Conditioned on Corruption Control”, African Governance and Development Institute Working Paper No. 15/007, Yaoundé.

Enders, W., & Todd, S., (2006). The Political Economy of Terrorism. New York: Cambridge University Press.

Enders W, Sandler T & Gaibulloev K., (2011). “Domestic versus transnational terrorism: Data, decomposition, and dynamics”. Journal of Peace Research, 48(3), pp. 319-337.

Eubank, W. L., & Weinberg, L., (1994). “Does Democracy Encourage Terrorism?” Terrorism and Political Violence, 6(4), pp.417-43.

Eubank, W. L., & Weinberg, L. B., (2001). “Terrorism and democracy: Perpetrators and victims”. Terrorism and Political Violence, 13(1), pp. 155-164.

Eyerman, J., (1998). “Terrorism and Democratic States: Soft Targets or Accessible Systems.” International Interactions, 24(2), pp.151-170.

Fazel, A., (2013). “The growing terrorism threat in Africa”, Mail & Guardian, http://mg.co.za/article/2013-12-17-the-growing-terrorism-threat-in-africa (Accessed: 20/01/2016).

Feridun, M., & Shahbaz, M., (2010). “Fighting Terrorism: Are Military Measures Effective? Empirical Evidence from Turkey”, Defence & Peace Economics, 21(2), pp. 193-205.

Findley, M. G., & Young, J. K., (2011). “Terrorism, Democracy, and Credible Commitments.” International Studies Quarterly 55(2), pp.357-578.

Foster, P., (2014). “Jihadists from around the world flock to fight with Isil; UN”, The Telegraph. http://www.telegraph.co.uk/news/worldnews/islamic-state/11200701/Jihadists-from-around-the-world-flock-to-fight-with-Isil-UN.html (Accessed: 01/12/2015).

Fosu, A. K., (2008). “Inequality and the Growth-Poverty Nexus: Specification Empirics Using African Data”, Applied Economics Letters, 15(7), pp. 563-566.

Fosu, A. K., (2009). “Inequality and the Impact of Growth on Poverty: Comparative Evidence for Sub-Saharan Africa”, Journal of Development Studies, 45(5), pp. 726-745.

Fosu, A. K., (2010a). “The Effect of Income Distribution on the Ability of Growth to Reduce Poverty: Evidence from Rural and Urban African Economies”, American Journal of Economics and Sociology, 69(3), pp. 1034-1053.

Fosu, A. K., (2010b). “Does Inequality Constrain Poverty Reduction Programs? Evidence from Africa”, Journal of Policy Modeling, 32(6), pp. 818-827.

Fosu, A. K., (2010c). “Inequality, Income and Poverty: Comparative Global Evidence”, Social Sciences Quarterly, 91(5), pp. 1432-1446.

Fosu, A., (2013). “Growth of African Economies: Productivity, Policy Syndromes and the Importance of Institutions”, Journal of African Economies, 22(4), pp. 523-551.

Fosu, A. K., (2015a). “Growth, Inequality and Poverty in Sub-Saharan Africa: Recent Progress in a Global Context”, Oxford Development Studies, 43(1), pp. 44-59.

Freytag, A., Krüger, J.J., Meierrieks, D., Schneider, F. (2011). “The origins of terrorism: Cross-country estimates of socio-economic determinants of terrorism”. European Journal of Political Economy, 27(S1), pp. 5-16.

Gailbulloev, K., Sandler, T., & Santifort, C., (2012). “Assessing the Evolving Threat of Terrorism”, Global Policy, 3(2), pp. 135-144.

Gani, A., (2011). “Governance and Growth in Developing Countries”, Journal of Economic Issues, 45(1), pp. 19-40.

Gassebner, M., & Luechinger, S., (2011). “Lock, Stock, and Barrel: A Comprehensive Assessment of the Determinants of Terror.” Public Choice, 149 (3-4), pp. 235-261.

Gause, F G. III., (2005). “Can democracy stop terrorism?” Foreign Affairs, 84(5), pp. 62-76.

Gries, T., Krieger, D., & Meierrieks, D. (2011). “Causal linkages between domestic terrorism and economic growth”. Defence and Peace Economics, 22(5), pp. 493-508.

Grossman, G., Humphreys, M., and Sacramone-Lutz, G., (2014). ““I wld like u WMP to extend electricity 2 our village”: On Information Technology and Interest Articulation”, American Political Science Review, 108(3), pp. 688-705.

Gurr, T.R. (1970). Why Men Rebel. Princeton University Press: Princeton.

Hoffman, A. M., Shelton, C., & Cleven, E., (2013). “Press Freedom, Publicity, and the Cross-National Incidence of Transnational Terrorism”, Political Research Quarterly, 66 (4), pp. 896-909.

Indridason, I. H., (2008). “Does Terrorism Influence Domestic Politics? Coalition Formation and Terrorist Incidents”, Journal of Peace Research, 45(2), pp. 241-259.

Jacobson, G. C., (2003). “Terror, Terrain, and Turnout: Explaining the 2002 Midterm Elections”. Political Science Quarterly, 118 (1), pp. 1-22.

Jolliffe, I. T. (2002) Principal Component Analysis (2nd Ed.) New York: Springer.

Jong-a-Pin, R., (2009). “On the measurement of political instability and its impact on economic growth”, The European Journal of Polical Economy, 25(1), pp. 15-29.

Kaiser, H. F. (1974) “An index of factorial simplicity” Psychometrika, 39(1), pp. 3-36.

Kaufmann, D., Kraay, A & Mastruzzi, M., (2010). “The worldwide governance indicators: Methodology and analytical Issues”. World Bank Policy Research Working Paper No 5430, Washington.

Kibris, A., (2010). “Terrorism, Elections and Ethnicity”. Working Paper, Sabanci University.

Krieger, T., & Meierrieks, D., (2015). “Does Income Inequality Lead to Terrorism? Evidence from the Post-9/11 Era”, Discussion Paper Series, Wilfried Guth Endowed Chair for Constitutional Political Economy and Competition Policy, University of Freiburg, No. 2015-04.

Krueger, A. B., & Maleckova. J., (2003). “Education, Poverty, and Terrorism: Is There a Causal Connection?” Journal of Economic Perspectives, 17(4), pp. 119-144.

Kuada, J., (2015). Private Enterprise-Led Economic Development in Sub-Saharan Africa The Human Side of Growth First edition by Kuada, J, Palgrave Macmillan: New York.

Kuncic, A. (2014). “Institutional Quality Dataset,” Journal of Institutional Economics, 10(1), pp.135–161.

Lai, B., (2007). “‘Draining the Swamp’: An Empirical Examination of the Production of International Terrorism, 1968–1998.” Conflict Management and Peace Science,24(4), pp. 297-310.

Lalountas, D.A., Manolas, G.A., & Vavouras, I. S., (2011), “Corruption, globalization and development: how are these three phenomena related?”, Journal of Policy Modeling, 33(4), pp. 636-648.

Langbein, L., & Knack, S., (2010). “The Worldwide Governance Indicators: Six, One, or None?”, The Journal of Development Studies, 46(2),pp. 350-370.

Langer, G., & Cohen, J., (2005). “Voters and Values in the 2004 Election”, Public Opinion Quarterly, 69 (5), pp. 744-759.

Laver, M., & Shepsle, K. A., (1998). “Events, Equilibria, and Government Survival”. American Journal of Political Science, 42(1), pp. 28-54

Lederman, D., Loayza, N.V., & Soares, R.R. (2005), “Accountability and corruption: political institutions matter”, Economics & Politics, 7(1), pp. 1-35.

Lee, C-Y., (2013). “Democracy, civil liberties and hostage-taking terrorism”, Journal of Peace Research, 50(2), pp. 235-248.

Li, Q., (2005). “Does Democracy Promote or Reduce Transnational Terrorist Incidents?” Journal of Conflict Resolution 49(2), pp.278-297.

Li, Q., & Schaub, D., (2004). “Economic Globalization and Transnational Terrorism”, Journal of Conflict Resolution, 48(2), pp. 230-258.

Love, I., & Zicchino, L., (2006). “Financial Development and Dynamic Investment Behaviour: Evidence from Panel VAR” .The Quarterly Review of Economics and Finance, 46(2), pp. 190-210.

Lum, C., Kennedy, L.W., & Sherley, A. J. (2006). “The effectiveness of counter-terrorism strategies. A Campbell Systematic Review”, Crime and Justice, 2(2), pp.1-49.

Muller, E.N., & Weede, E. (1994). “Theories of rebellion: Relative deprivation and power contention”. Rationality and Society, 6(1), pp. 40-57.

Omand, D., (2005). “Countering international terrorism: the use of strategy”. Survival, 47(4), pp. 107-116.

Østby, G., (2008). “Polarization, horizontal inequalities and violent civil conflict”. Journal of Peace Research, 45(2), pp.143-162.

Piazza, J. A., (2006). “Rooted in Poverty? Terrorism, Poor Economic Development, and Social Cleavages.” Terrorism and Political Violence, 18 (1), pp. 159-77.

Piazza, J., (2007). “Draining the Swamp: Democracy Promotion, State Failure, and Terrorism in 19 Middle Eastern States.” Studies in Conflict and Terrorism, 30(6), pp. 521-539.

Piazza, J., (2008a). “Incubators of Terror: Do Failed and Failing States Promote Transnational Terrorism?” International Studies Quarterly, 52(3), pp.468-488.

Piazza, J., (2008b). “Do democracy and free markets protect us from terrorism?” International Politics, 45(1), pp. 72-91.

Piazza, J. A., (2011). “Poverty, Minority Economic Discrimination and Domestic Terrorism”, Journal of Peace Research, 48 (3), pp. 339-353.

Piazza, J. A., (2013). “The Cost of Living and Terror: Does Consumer Price Volatility Fuel Terrorism?” Southern Economic Journal, 79 (4), pp. 812-831.

Poulton, C., (2014). “Democratisation and the Political Incentives for Agricultural Policy in Africa”. Development Policy Review, 32(S2), pp. S101-S122.

Resnick, D., (2015). “The Political Economy of Africa's Emergent Middle Class: Retrospect and Prospects”, Journal of International Development, 27(5), pp. 573-587.

Rodrik, D., (2015). “Premature Deindustrialization”, IAS School of Social Science Economic Working Paper No. 107, Princeton University, Princeton.

Roodman, D., (2009a). “A Note on the Theme of Too Many Instruments”, Oxford Bulletin of Economics and Statistics, 71(1), pp. 135-158.

Roodman, D., (2009b). “How to do xtabond2: An introduction to difference and system GMM in Stata”, Stata Journal, 9(1), pp. 86-136.

Ross, J. I., (1993). “Structural causes of oppositional political terrorism: Towards a causal model”. Journal of Peace Research, 30(3), pp. 317-329.

Sandler, T. (2005). “Collective versus unilateral responses to terrorism”. In Policy Challenges and Political Responses, Springer USA, pp. 75-93. DOI: 10.1007/0-387-28038-3_5.

Savun, B., & Phillips, B. J., (2009). “Democracy, foreign policy, and terrorism”. Journal of Conflict Resolution, 53(6), pp. 878-904.

Siqueira, K., & Sandler, T., (2007). “Terrorist Backlash, Terrorism Mitigation, and Policy Delegation”. Journal of Public Economics, 91 (9), pp. 1800-1815.

Schmid, A. P., (1992). “Terrorism and Democracy.” Terrorism and Political Violence, 4(4), pp.14-25.

Snow, B. C., (2009). “Mobile Phone Diffusion and Corruption in Africa”, Political Communication, 26(3), pp.333-353.

Straus, S., (2012). “Wars do end. Changing Patterns of Political Violence in Sub-Saharan Africa”, African Affairs, 111(443), pp. 179-201.

Tabor, J. O., (2016). “Terrorism or clamor for resource control: An analysis of Nigeria’s Niger Delta militants”, Journal of Terrorism Research, 7(3), pp. 23-34.

Tchamyou, V. S., (2017). “The Role of Knowledge Economy in African Business”, Journal of the Knowledge Economy, 8(4), pp. 1189–1228.

Tchamyou, V. S., (2018). “Education, Lifelong learning, Inequality and Financial access: Evidence from African countries”, Contemporary Social Science. DOI: 10.1080/21582041.2018.1433314.

Tchamyou, V. S., & Asongu, S. A., (2017). “Information Sharing and Financial Sector Development in Africa” Journal of African Business, 18(7), pp. 24-49.

Tchamyou, V. S., Asongu, S. A., & Nwachukwu, J. C., (2018). “Effects of asymmetric information on market timing in the mutual fund industry”, International Journal of Managerial Finance. DOI: 10.1108/IJMF-09-2017-0187.

Weinberg, L. B., & Eubank, W. L., (1998). “Terrorism and democracy: What recent events disclose?” Terrorism and Political Violence, 10(1), pp. 108-118.

Williams, L. K., (2012). “The Political Consequences of Terrorism: Terror Events, Casualties, and Government Duration”, International Studies Perspectives, (2012), pp. 1-19.

Windsor, J. L., (2003). “Promoting democratization can combat terrorism”. Washington Quarterly, 26(3), pp. 43-58.

World Bank (2015). “World Development Indicators’, World Bank Publications http://www.gopa.de/fr/news/world-bank-release-world-development-indicators-2015 (Accessed: 25/04/2015).

Yerrabati, S., & Hawkes, D., (2015). “Economic Governance and Economic Growth in South and East Asia & Pacific Region: Evidence from Systematic Literature Reviews and Meta-analysis”. Advances in Economics and Business, 3(1) , pp. 1 - 21.