May 1, 2010
With panel estimates, this paper investigates the neoclassical determinants of income per capita growth for 51 African countries for 1970–2007, while accounting for cross-sectional (spatial) dependence and conflict (i.e., terrorism, internal conflicts, and external wars). For the entire sample, fixed-effects panel estimates find that transnational terrorism has a significant, but modest, marginal impact on income per capita growth. These results hold for two different terrorism event data sets. However, domestic terrorist events do not affect income per capita growth. This suggests that an earlier growth study, which did not include domestic terrorist events for a different sample and time period, provided an accurate picture for Africa. The paper contains a host of robustness checks that find virtually identical results. Alternative terrorist variables are also used, with little qualitative change in the findings. The absence of a domestic terrorism impact is surprising because there were generally many more domestic than transnational terrorist incidents in Africa. To promote growth, host and donor countries must direct scarce counterterrorism resources to protect against transnational terrorism in particular.