Anniversary Special Issue

Journal of Peace Research

2014, Vol. 51(2) 257–271
The analytical study of terrorism: ª The Author(s) 2013
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DOI: 10.1177/0022343313491277
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Todd Sandler
Department of Economics, School of Economic, Political & Policy Sciences, University of Texas at Dallas

Abstract
This article presents an eclectic review of the analytical study of terrorism that views all agents as rational decision-
makers. This analytical literature began in earnest with the seminal study of US skyjackings by William Landes in
1978. After 11 September 2001, the analytical literature on terrorism grew rapidly. Based on policy relevance, my
survey article identifies five key areas of intense research interests. These include analyses of terrorist attack trends,
the economic consequences of terrorism, the study of counterterrorism effectiveness, the causes of terrorism, and
the relationship of terrorism and liberal democracies. New developments in the field focused on distinguishing key
differences between domestic and transnational terrorism. Additionally, recent game-theoretic advances permitted
more active agents and stages to the games. Other major developments involved the study of networked terrorists
and the role of counterterrorism foreign aid. Fruitful future directions include using advanced econometric meth-
ods to discern the true impact of terrorism on growth, applying spatial econometrics to the study of terrorism,
ascertaining the determinants of terrorist groups’ longevity, and learning how to foster international counterter-
rorism cooperation.

Keywords
counterterrorism effectiveness, domestic and transnational terrorism, economic consequences of terrorism, game
theory

Introduction that the true target of the anxiety-generating attacks is a

wider public, who may pressure the government to con-
Terrorism is the premeditated use or threat to use vio-
cede to the demands of the terrorists.
lence by individuals or subnational groups to obtain a
The study of terrorism has been an active field of
political or social objective through the intimidation of
research in economics, political science, sociology, and
a large audience beyond that of the immediate victims
related disciplines since the late 1960s. At first, political
(Enders & Sandler, 2012). This definition is consistent
science took a conceptual and historical approach to the
with others in the literature (Hoffman, 2006; RAND,
study of terrorism, which was pragmatic in the absence
2012). Violence is a hallmark of terrorism, with some
of data and theoretical constructs for terrorist behavior.
terrorist groups engaging in gruesome attacks to create
The early conceptual approach focused on the definition
widespread anxiety or revulsion. To qualify as terrorism,
of terrorism, the myriad causes of terrorism, the tactics of
an attack must have a political motive. By limiting terror-
the terrorists, and the identity of the primary terrorist
ism to subnational agents, the above definition rules out
groups and movements (e.g. Crenshaw, 1981; Wilkin-
state terror, where a government terrorizes its own people.
son, 1986).
However, the definition does not eliminate state-
sponsored terrorism, in which a government secretly aids
a terrorist group through funds, intelligence, safe passage, Corresponding author:
or some other means. Finally, the definition emphasizes tsandler@utdallas.edu
258 journal of PEACE RESEARCH 51(2)

The analytical study of terrorism derived, in part, three primary terrorist event datasets are briefly intro-
from scholars, such as William Landes, who viewed ter- duced, because most of the empirical literature used one
rorists as rational actors. Rationality is based on predict- or more of them. In the ensuing five sections, the article
ability rather than on the desirability of terrorists’ tactics highlights active areas of research that have much policy
or goals. If changes in terrorists’ constraints, say through relevance. First, a knowledge of terrorist trends can
government policies, result in predictable behavioral inform forecasting and policy. Second, analyses of the
responses by the terrorists, then terrorists are rational economic consequences of terrorism identify some of the
actors. Some researchers – most notably Abrahms social costs of terrorist campaigns. Knowledge of these
(2008) – questioned whether terrorists are rational, beca- costs can indicate the potential gains from effective coun-
use they usually do not achieve their sought-after goal. terterrorism policies that limit terrorist attacks. Third,
Abrahms (2008: 83) stated: ‘I found that in a sample governments must ascertain the effectiveness of their
of twenty-eight well-known terrorist campaigns, the ter- defensive and proactive countermeasures, so that ineffec-
rorist organizations accomplished their stated policy tive measures are discontinued. Fourth, understanding
goals zero percent of the time by attacking civilians’. In the root causes of terrorism allows a society to take steps
contrast, Jones & Libicki (2008) indicated 132 cam- to reduce grievances and, therefore, limit terrorism.
paigns where the terrorist groups renounced terrorism Fifth, the relationship between democracies and terrorism
and joined the political process or else achieved their can educate policymakers on the inherent risks of political
goal. Although Abrahms (2008) raised many interesting regimes at home and in countries where these policy-
challenges to rationality, his evidence is somewhat makers have vital interests. The next-to-last section
selective.1 presents some major new developments in the analytical
The analytical study of terrorism was also fostered by study of terrorism – e.g. deconstructing terrorism into
the collection of event data. In his landmark study of domestic and transnational attacks, game-theoretic
skyjackings, Landes (1978) used US Federal Aviation analyses of counterterrorism, and the role of foreign aid.
Association (FAA) data on skyjackings to estimate the These developments are highlighted because there are
deterrent effects of US antiterrorism policies against sky- lots of recent articles on these topics. Moreover, I believe
jackings during 1961–79. Landes (1978) applied meth- that interest in these topics will continue in the future.
ods and concepts from the economic analysis of crime to The final section contains future directions for research
identify effective deterrents to US skyjackings – e.g. the and a few concluding remarks.
likelihood of apprehension, the likelihood of conviction,
length of prison sentences, the presence of airport metal
detectors, and sky marshals on planes. Most important, Event databases
he found that airport metal detectors reduced US sky- An important distinction for the three event databases
jackings by 4.4 to 8.8 incidents per year. Landes could concerns domestic and transnational terrorism. Domes-
then translate these findings into the value of metal tic terrorist incidents are homegrown and home directed
detector installation. with consequences for just the host or venue country, its
After the heinous attacks on 11 September 2001 (9/ institutions, citizens, property, and policies.2 For a
11), there was an explosion of terrorism literature, both domestic terrorist incident, the three key agents – the
conceptual and analytical. The main purpose of this arti- perpetrators, victims, and targets – are all from the venue
cle is to present an eclectic overview of the analytical country. In contrast, transnational terrorist attacks
approach to the study of terrorism. The analytic litera- involve victims, perpetrators, targets, supporters, or terri-
ture is voluminous, so I must selectively choose which tory from more than one country. As such, transnational
articles to cite. I favor articles that have either garnered terrorism generates international externalities that con-
a lot of citations or else, I believe, will do so in the future. found effective policy.
This survey is organized as follows. In the next section, The empirical research on terrorism has profited
greatly from event databases that record key variables
1
Moreover, some groups seek recognition or carnage, so that their
2
utility may not necessitate victory. Pape (2003) identified a This definition agrees with that of RAND (2012). In contrast,
number of suicide terrorist campaigns that achieved the groups’ Young & Dugan (2011) defined domestic incidents as homegrown,
stated goal. Additionally, Gould & Klor (2010) showed that Israel but allowed for foreign victims. This practice means that their
granted territorial concessions following Palestinian terror attacks domestic incidents can have international externalities, which the
during 1988–2006. standard definition avoids.
Sandler 259

of terrorist incidents. Since the 1970s, the International rule of thumb, more complex attack modes – e.g. sky-
Terrorism: Attributes of Terrorist Events (ITERATE) jackings – display longer cycles than simpler modes –
dataset has coded many variables (e.g. incident date, e.g. threats and hoaxes or bombings (Sandler & Enders,
country location, target entity, attack type, casualties, 2004). Insofar as bombings are a composite of many
perpetrators’ nationalities, terrorist group, victims’ different kinds of attacks (e.g. letter bombs, explosive
nationalities, and logistical outcome) for transnational bombings, and car bombings), bombings are represented
terrorist incidents. Currently, ITERATE’s coverage is by multiple cycles of alternative lengths. By knowing these
1968–2011, with yearly updates coming during the cycles, law enforcement agents may be able to anticipate
summer (Mickolus et al., 2012). ITERATE, like the the next wave of attacks when cycles are regular.
other event databases, relies on the news media for its Transnational terrorist attacks rose from 1968 to the
variables. For hostage-taking incidents, ITERATE also mid-1980s when there were about 500 incidents per
contains negotiation variables, which have been invalu- year, as shown in Figure 1 based on ITERATE data. The
able in studies on hostage taking (e.g. Gaibulloev & 1980s was the decade of state-sponsored terrorism (Hoff-
Sandler, 2009). The initial fixation of empirical articles man, 2006). After the mid-1990s, the number of trans-
on transnational terrorist incidents occurred because national terrorist incidents fell precipitously to
ITERATE was the most extensive dataset available dur- approximately 100 to 200 events per year. This fall is
ing the 1980s and 1990s. Another competing dataset is attributed to the decline in state sponsorship and the
the RAND (2012) terrorist event database, which cur- decline of left-wing terrorists. In Figure 2, I display the
rently codes terrorist incidents for 1968–2009. After proportion of transnational and domestic terrorist events
1997, the RAND dataset began recording domestic ter- with casualties (i.e. deaths and/or injuries), based on
rorist incidents, so that it identifies transnational terrorist ITERATE and GTD, respectively.3 As shown, transna-
incidents for 1968–2009 and domestic terrorist inci- tional terrorism shows a rising proportion of incidents
dents for 1998–2009. Compared to ITERATE, the with casualties from 1997 on, corresponding to the
RAND event dataset codes fewer variables and for trans- growing dominance of the religious fundamentalist ter-
national terrorist incidents has more limited coverage rorists, who sought greater carnage (Enders & Sandler,
than ITERATE (Enders, 2007). 2000; Rapoport, 2004). Before 1990, 26% of transna-
The Global Terrorism Database (GTD) records both tional terrorist attacks ended in casualties; after 1990,
domestic and transnational terrorist incidents (La Free & 41% of these attacks resulted in casualties. Based on
Dugan, 2007), which could assist researchers in identify- Enders, Sandler & Gaibulloev’s (2011) division of GTD
ing differences between the two types of terrorism – e.g. data, Figure 2 also indicates that the proportion of
their impacts on economic growth. For GTD, this parti- domestic terrorist events with casualties displays a rising
tion of domestic and transnational terrorist incidents was trend from 1989 to 2005. As shown, the proportion of
first accomplished by Enders, Sandler & Gaibulloev domestic terrorist attacks with casualties is always greater
(2011) for 1970–2007 and has been updated by them than that of transnational terrorist attacks with casualties.
through 2010. There are many essential differences Moreover, domestic terrorist incidents outnumber trans-
between GTD and ITERATE beyond the coverage of national terrorist incidents by four to ten times depend-
domestic terrorism by GTD. For example, the perpetra- ing on the dataset and time period consulted.
tors’ nationalities are not recorded in GTD after 1997; Another interesting pattern comes from the terrorists’
very few logistical failures are listed in GTD; and many choice of targets. Suppose that targets are partitioned
insurgent attacks are included before 1998 in GTD. into four general categories: officials, military, business,
These datasets can serve many useful purposes provided and private parties. As shown in Figure 3 (based on
that researchers are aware of their idiosyncrasies. ITERATE), transnational terrorists have rationally
responded to security measures in their targeting deci-
sions. As officials were afforded protection by the state,
How has terrorism changed since 1968? transnational terrorists increasingly attacked softer business
Because event datasets only go back to 1968, any study targets in the 1970s. As businesses protected their assets,
of the patterns of terrorism must commence with 1968. terrorists switched to attacking private parties, so that these
Terrorism data show specific cycles (i.e. regular-spaced
peaks and troughs) attached to alternative modes of
attacks as terrorists and their government adversaries 3
Figure 2 is an update of a graph in Gaibulloev, Sandler & Santifort
respond to one another’s countermeasures. As a general (2012).
260 journal of PEACE RESEARCH 51(2)

Figure 1. Number of transnational terrorist incidents (ITERATE), 1968–2011

Figure 2. Proportion of transnational and domestic terrorist events with casualties

latter attacks surpassed business attacks in 1980 (Brandt & 2012). This is probably due to two drivers: (i) people are
Sandler, 2010, 2012). By 1999, terrorist attacks against a softer target, and (ii) religious fundamentalist terrorists
private parties even surpassed those directed at officials. seek greater numbers of casualties. These and other trends
Domestic terrorism showed an analogous but faster pro- in terrorist attacks can inform policymakers on how to allo-
gression among target types, where attacks on private cate their limited counterterrorism resources.
parties overtook those against officials by 1981 with an
ever-growing gap thereafter (Gaibulloev, Sandler & Santi-
fort, 2012: 141). Another disturbing trend is that terrorists
Economic consequences of terrorism
directed more of their attacks against people than against The total direct and indirect costs of the four hijackings
property after the early 1990s (Brandt & Sandler, 2010, on 11 September 2001 have been estimated to be $80 to
Sandler 261

Figure 3. Cumulative number of transnational terrorist incidents by target type, 1968–2010

$90 billion when the gross domestic product (GDP) of but lower risks of terrorism. The need for more
the United States in 2001 was about $10 trillion (Kun- government-supported counterterrorism measures may
reuther, Michel-Kerjan & Porter, 2003). The direct crowd out public and private investments owing to
costs of terrorism involve the immediate losses associated higher taxes. There may also be microeconomic level
with a terrorist attack and encompass the value of dam- impacts from terrorism as some sectors or locations are
aged structures, lives lost, injuries sustained, lost wages, at greater peril from terrorist attacks. In a time-series
destroyed goods, cleanup, and reduced commerce. Indi- analysis, Enders, Sandler & Parise (1992) showed that
rect or secondary costs of terrorism include attack-related terrorist attacks directed at the Greek tourist industry
subsequent expenses such as higher insurance premiums, cost Greece 23.4% of its annual tourism revenue for
enhanced security costs, counterterrorism expenses, and 1988. Another wave of terrorist attacks in Austria during
lost future commerce. Increased compensation paid to 1985–87 cost Austria 40.7% of its annual tourist reven-
those at high-risk locations may also constitute an indi- ues for 1988 (also, see Drakos & Kutan, 2003).
rect cost of terrorism. The distinction between direct and There are some general economic principles that can
indirect costs of terrorism is not easy to draw. Unlike be drawn from the voluminous literature on the eco-
9/11, most terrorist attacks have modest economic costs nomic consequences of terrorism. First, rich, diversified
(Enders & Sandler, 2012). Even large-scale attacks have countries are generally able to withstand their annual ter-
small losses as a percentage of GDP. For example, the rorist attacks with few macroeconomic impacts. This fol-
costs of the Madrid commuter train bombings on 11 lows because economic activities move from terrorism-
March 2004 were estimated to be $335.1 million or prone sectors (provinces) to safer sectors (provinces)
about 0.03% of Spain’s GDP at the time (Busea et al., within the country (Sandler & Enders, 2004). This first
2007). principle is consistent with the observation that most ter-
Economic consequences of terrorism can be at the rorist incidents cause few casualties (i.e. one death on
macroeconomic level in terms of reduced GDP or lost average) and modest property damage based on ITER-
GDP growth. Macroeconomic aggregates – consump- ATE. Advanced economies can offset the effects of ter-
tion, investment, and government expenditures – may rorism with well-directed fiscal and monetary policies,
also be affected by terrorist attacks. A country that as the USA did following 9/11 (Enders & Sandler,
experiences a significant terrorist campaign may lose 2012: 296–298). Second, small terrorism-plagued
investment owing to a higher perceived risk on the part economies – e.g. Israel, Colombia, and the Basque
of the investors (Blomberg, Hess & Orphanides, 2004). Country in Spain – will experience significant losses of
Moreover, such investors may be expected to transfer GDP amounting to upwards of 10% of GDP during sus-
their funds to other countries with similar rates of returns tained terrorist campaigns (e.g. Abadie & Gardeazabal,
262 journal of PEACE RESEARCH 51(2)

2003). Third, small developing countries are apt to show with an increase in terrorist incidents with casualties
detrimental economic effects from terrorism (Enders & (Enders & Sandler, 2012). To truly investigate the effec-
Sandler, 2012; Gaibulloev & Sandler, 2011). This is tiveness of such barriers, a researcher must ascertain the
likely true of failed states that host terrorist groups, impact of the intervention on substitute and comple-
because such groups will scare away foreign direct invest- mentary modes of attack. In the case of metal detectors,
ment (FDI), which is an important source of savings embassy incursions later went down as barriers were
and, hence, growth. If, however, a developing country installed to protect the compounds (Enders & Sandler,
has only a modest amount of terrorism, then the country 2012: 166). Landes (1978) did not allow for these other
should weather these attacks with little economic stress. impacts. To judge the effectiveness of an intervention,
Fourth, most cross-sectional and panel studies of one would need to know the costs of the action and its
regional aggregates found that terrorism caused a small, resulting benefit. The latter is difficult to determine
but significant, negative impact on per capita GDP because it involves a counterfactual – the number of
growth (Enders & Sandler, 2012: 298–304). In Blom- attacks in the absence of the intervention.
berg, Hess & Orphanides (2004), the fall in this growth Transference is a key consideration for evaluating
rate was about 0.05% per year for an average country in most counterterrorism actions. For example, enhancing
their worldwide sample (also see Gaibulloev & Sandler, embassy security induced terrorists to assassinate officials
2011). Fifth, even though terrorism-prone sectors may outside the compound (Enders & Sandler, 1993).
sustain substantial economic losses, these losses are Actions to secure, say, Americans on US soil through
small relative to the entire economy. This follows homeland security resulted in more attacks against Ame-
because the tourism or FDI-sector is generally small ricans on foreign soil (Enders & Sandler, 2006). Before
relative to overall GDP. Sixth, the immediate costs of and after 9/11, about 40% of transnational terrorist
most terrorist attacks are localized, like crime, which attacks were directed against US interests even though
can be ameliorated through the transference of eco- very few of these attacks occurred on US soil after
nomic activities to safer locations. Seventh, major stock 9/11 (Enders & Sandler, 2012). Apparently, terrorists
markets have shown little reaction to large-scale terror- weighed changing risks, as rational action predicts, when
ist incidents, with the exception of 9/11 when world they chose where and how to attack.
stock indices fell greatly but recovered lost value in Another counterterrorism disappointment is the
30–40 days (Chen & Siems, 2004). Typically, terrorist apparent lack of effectiveness of UN resolutions and con-
attacks affect the stock value of specific companies for a ventions. Some researchers saw great promise in these
relatively short period of time. For example, Drakos treaties (Wilkinson, 1986). Intervention vector autore-
(2004: Table 3) estimated that airline stocks had recov- gression studies showed that past UN resolutions and
ered their full value in less than a year after 9/11, which conventions had no measurable effect on particular out-
had an unprecedented effect on these stocks (also see lawed modes of attack (e.g. bombings, skyjackings, or
Chen & Siems, 2004). blowing up planes) (Enders & Sandler, 1993, 2012).
That is, the pre-intervention mean of the particular
outlawed attack mode did not differ from the post-
Effectiveness of counterterrorism policies intervention mean after the treaty was ratified. This is
Since the Landes (1978) study, there has been a research not surprising because these treaties have no enforce-
interest in measuring the effectiveness of specific coun- ment mechanism and only a few noncompliant states
terterrorism policies. Even though technological barriers can undo the gains from compliant states.
can inhibit a specific type of terrorist incident, such bar- Time-series studies also investigated the counterter-
riers may have unintended consequences as they cause rorism effectiveness of retaliatory raids, such as the US
transference of attacks. Transference is an unintended bombing raid in 1986 on Libya, following the La Belle
policy-induced change in terrorist behavior, which discotheque bombing in Berlin. Enders & Sandler
includes displacement of the mode or venue of attack (1993) found an intertemporal substitution, where ter-
owing to target hardening. For instance, metal detectors rorists moved attacks planned for the future to the pres-
made skyjackings more costly, while they made other ent to protest the raid. As a consequence, terrorist attacks
kinds of hostage taking relatively less costly. As a conse- went up following the raid and declined months later as
quence, the number of skyjackings fell as kidnappings terrorists had to replenish spent resources. The overall
became more frequent (Enders & Sandler, 1993). In fact, level of terrorist attacks did not change in the near term.
the 1973 installation of metal detectors was associated Brophy-Baermann & Conybeare (1994) discovered the
Sandler 263

same pattern for Israeli retaliatory raids on the Palesti- consensus on the root cause of domestic and transna-
nian terrorists. tional terrorism for various sample countries. Economic
Using Palestinian–Israeli data, Dugan & Chenoweth discrimination, religious persecution, nationalist/separa-
(2012) provided a comparison between the use of repres- tist motives, religious fundamentalism, political ideolo-
sive deterrence and conciliatory actions against terrorists. gies, and other grounds may erupt in terrorism by
The latter actions reward would-be terrorists for refrain- marginalized groups (Wilkinson, 1986). After 9/11,
ing from violence. Dugan & Chenoweth’s (2012) para- there was a popular belief that poverty led to transna-
metric and nonparametric empirical analyses showed tional terrorism; however, Krueger & Maleckova
that indiscriminate repressive actions resulted in more (2003) uncovered little relationship between the lack
terrorist attacks, whereas indiscriminate conciliatory of market opportunities and terrorism (also see Piazza,
actions resulted in fewer terrorist attacks. These results 2006). Opinion polls of Palestinians in the West Bank
are in agreement with past studies about repression- and the Gaza Strip showed that support for terrorist
induced backlash attacks (see e.g. Bloom, 2005; Rosen- attacks did not decrease with income or educational
dorff & Sandler, 2004; Siqueira & Sandler, 2007). level. For a cross-section sample of countries, Krueger
Theoretical work indicated that governments have & Maleckova (2003) found that low income was not
more success addressing domestic than transnational associated with more terrorism when civil and political
terrorism, because a national government can internalize liberties were controlled. These authors concluded that
all externalities for potential domestic targets (Enders & it is the lack of these liberties, not poverty, that caused
Sandler, 2012; Sandler, 2005). Moreover, other nations terrorism. In a provocative study, Enders & Hoover
cannot free ride on its proactive efforts to eradicate a (2012) argued for a nonlinear relationship between
domestic terrorist group. When the French eradicated income and terrorism in which middle income is more
Action Directe, no other countries derived benefits conducive to terrorism (also see de la Calle & Sánchez-
because the group did not attack the interests of other Cuenca, 2012). In poor countries, the population is
countries. For a common transnational terrorist threat, more focused on day-to-day survival, while in rich coun-
sovereign governments generally overspend on defensive tries there are fewer grievances to fuel terrorism.
measures to shift attacks abroad, while these governments Given the myriad contradictory findings on the root
underspend on proactive (offensive) measures in order to causes of terrorism, there was a need for an article that
free ride on the efforts of other governments (Arce & tried to sort out the drivers of these differences. To do
Sandler, 2005; Sandler & Siqueira, 2006). Thus, defen- so, Gassebner & Luechinger (2011) applied extreme
sive measures result in negative transnational external- bound analysis to identify robust determinants or causes
ities,4 while proactive measures lead to positive of terrorism. They used ITERATE, GTD, and RAND
transnational externalities. This overspending on defense event datasets. In addition, these authors performed dif-
may be offset for countries having significant assets ferent panel runs for the victim, venue, and perpetrator
abroad. If US homeland security shifts terrorist attacks countries. Key determinants of the number of terrorist
to the Middle East or Asia where US citizens are killed, the attacks differed by the dataset and country identifier.
incentive to shift attacks overseas is curtailed. Instead, the There is more commonality among robust variables for
USA may be induced to take actions to eliminate the par- the victim and venue countries than for the perpetrator
ticular terrorist threat altogether. Proactive responses countries. For the victim country, GDP per capita, pop-
against a terrorist threat may unleash backlash if terrorist ulation, wars, and religious and ethnic tensions are pos-
supporters view such actions as excessive, thereby resulting itive determinants of terrorist attacks, while economic
in new recruits. When this occurs, the positive benefits freedoms and physical integrity rights (i.e. absence of
conveyed to other countries from the actions are reduced human rights abuse) are negative determinants of these
by the backlash costs, so that underspending is curtailed. attacks. For the venue country, these authors found that
economic freedom, physical integrity rights, and law and
Causes and roots of terrorism order are negative influences on terrorism, while popula-
tion, military spending, involvement in wars, foreign
Insofar as terrorism has myriad root causes, it is not sur- portfolio investment, and political proximity to the
prising that the empirical literature has come to little United States (in terms of the UN General Assembly
voting) are positive influences on terrorism. For panel
4
A transnational externality is an uncompensated interdependency runs based on the perpetrators’ country of origin, inhibi-
involving two or more countries. tors of terrorism include economic freedom, physical
264 journal of PEACE RESEARCH 51(2)

integrity rights, and the number of telephone mainlines, the dependent variable – i.e. the number of transnational
whereas promoters of terrorism include civil wars and terrorist events. For a sample of 119 countries during
centrist governments. This study is noteworthy because 1975–97, Li (2005) found that democratic participation
it showed that the data source and the country viewpoint reduced transnational terrorist attacks (also see Eyerman,
can influence which determinants of terrorism are signif- 1998), while democratic governments’ executive con-
icant. This realization is consistent with the bewildering straints increased transnational terrorist attacks. Numer-
number of articles that claimed to find different root ous subsequent studies investigated the relationship
causes for terrorism. between democracy and terrorism. Based on RAND
Surely, the causes of domestic and transnational ter- data, Savun & Phillips (2009) demonstrated that demo-
rorism will differ. The roots of domestic terrorism will cratic principles positively affected the amount of
naturally be country specific, so that large-N cross- transnational terrorism, but did not affect the amount
sectional or panel studies will provide an average picture of domestic terrorism. As these authors delved further
that may be a poor indicator for individual countries. In into the cause of transnational terrorism, they found
contrast, such an average view may be more appropriate that democracies that engaged in foreign policy crises
for the cause of transnational terrorism where terrorist with other countries attracted more transnational terror-
groups may be dominated by common grievances, such ism. Moreover, alliance ties with the United States and
as left-wing ideologies during the 1970s and 1980s or interventions in foreign civil wars also resulted in the coun-
religious fundamentalism after the start of the 1990s. try experiencing more transnational terrorist attacks.
Thus, democratic principles per se did not generate
such attacks.
Dilemma of liberal democracies The relationship between democracy and terrorism
Wilkinson (1986) raised an important terrorism remains an active area of research. For example, Cheno-
dilemma that plagues some liberal democracies, whose weth (2010) argued that intergroup competition is a
legitimacy rests on the protection of their citizens’ lives driver of transnational terrorist incidents in democracies
and property. His concern is that terrorists can force as terrorist groups vie for supporters. Chenoweth’s unit
these liberal democracies into a double blind. If a liberal of analysis was a cross-national longitudinal study of
democracy responds too passively to the terrorist threat 119 countries for 1975–97, based on ITERATE data.
and appears unable to guarantee its citizens’ safety, then She did not investigate whether intergroup competition
the government loses its legitimacy and may be voted out was also more conducive to domestic terrorism. Cheno-
of office. If, instead, the government reacts too harshly to weth (2010) also presented evidence that political com-
the terrorist threat, then the government’s overreaction petition resulted in more terrorist groups in the
may compromise democratic principles, thereby making country. In a recent panel analysis, Young & Dugan
the government less popular. In the process, the terrorists (2011) showed that the presence of veto players (i.e. enti-
may gain supporters. This dilemma and its dynamics ties that can block policy changes) was positively related
may induce terrorists to locate attacks in liberal democ- to homegrown and all fatal attacks based on GTD event
racies rather than in autocracies. Moreover, these democ- data.
racies may unwittingly facilitate terrorism through
executive constraints on power, freedom of association,
Major new developments in the study
freedom of speech, right to privacy, press freedoms, a
target-rich environment, and other considerations (Hoff-
of terrorism
man, 2006; Wilkinson, 1986). Starting with Eubank & I now present a few areas where there is much current
Weinberg (1994), empirical researchers have been con- and, I anticipate, future interest. GTD data provide a
cerned whether democracies are more likely to host ter- chance to deconstruct terrorism into domestic and trans-
rorist groups than autocracies. Based on an odds ratio national incidents in order to test a host of hypotheses.
test, Eubank & Weinberg (1994) found that terrorist This opportunity was afforded once Enders, Sandler &
groups are more likely present in a democracy as com- Gaibulloev (2011) partitioned GTD into its two compo-
pared to an autocracy. These authors also discovered that nent types of terrorism. Table I indicates hypothesized
fledgling and transition democracies are vulnerable to and tested differences between domestic and transna-
terrorism. tional terrorism. For instance, Piazza (2011) found that
In a follow-up article, Li (2005) applied negative economic discrimination was a clear determinant of
binomial regressions to account for the count nature of domestic terrorism; however, this discrimination was not
Sandler 265

Table I. Reasons for distinguishing between domestic and transnational terrorism

 Causes of each type of terrorism may differ – e.g. economic discrimination for domestic terrorism (Piazza, 2011) and
foreign policy decisions for transnational terrorism (Savun & Phillips, 2009).
 The two types of terrorism may display different dynamic responses – e.g. domestic terrorism may Granger-cause trans-
national terrorism, but transnational terrorism may not Granger-cause domestic terrorism (Enders, Sandler & Gaibul-
loev, 2011).
 The effectiveness of counterterrorist policies may differ between the two types of terrorism because sovereign
governments may not account for the associated transnational externalities of their countermeasures against
transnational terrorism. For domestic terrorism, there are no transnational externalities. (Not tested.)
 Counterterrorist costs differ between the two kinds of terrorism – e.g. the costs to fight transnational terrorism are high as
a country projects its power beyond its borders to a terrorist group’s safe haven. (Not tested.)
 Transnational terrorism may require international cooperation, which is generally not needed for domestic terrorism.
(Not tested.)
 The macroeconomic consequences may differ – i.e. transnational terrorism may affect growth and other macroeconomic
aggregates in a different manner than domestic terrorism (Gaibulloev & Sandler, 2008, 2011).
 Terrorism’s impact on various economic sectors may differ – e.g. transnational terrorism affects tourism, FDI, and trade
(Enders & Sandler, 2012), while domestic terrorism impacts provinces within the country (Abadie & Gardeazabal,
2003).
 Domestic terrorist attacks are likely tied to internal wars, while transnational terrorist attacks are likely tied to interstate
wars. (Not tested.)
 The survival of terrorist groups may hinge on their mix of transnational and domestic terrorist attacks owing to the
enhanced risks posed by transnational terrorist attacks (Blomberg, Gaibulloev & Sandler, 2011).
 Homegrown terrorism is more linked than transnational terrorism to the presence of veto players (Young & Dugan,
2011).
 Remittances are more supportive of domestic than of transnational terrorism (Mascarenhas & Sandler, 2013).
Articles testing the hypotheses are indicated.

an unequivocal determinant of transnational terrorism. implied by Table II. To date, there are not many tests
This follows because attacks against foreign venues or of these propositions, primarily because there are limited
assets may be motivated by foreign policy decisions and data on counterterrorism actions of governments – e.g.
other perceived grievances. Using country-year count we do not have data on how governments allocate defen-
data on terrorist attacks from RAND, Savun & Phillips sive resources. Thus, empirical support in articles relies on
(2009) found that foreign policy was a significant deter- a few specific examples. There are a few exceptions, where
minant of transnational, but not of domestic, terrorism the propositions are empirically tested. For example, Ben-
in democracies. Additional hypotheses, along with the melech, Berrebi & Klor (2012) presented empirical sup-
articles supporting them, are displayed in Table I. As port for Bueno de Mesquita’s (2005) quality of
indicated, some suggested hypotheses are not yet tested. terrorism hypothesis. Based on Jones & Libicki (2008)
Many other hypotheses, distinguishing domestic and data on terrorist groups, Bapat (2011) provided cross-
transnational terrorism, are tested, but space does not sectional support for his moral hazard argument about
permit them to be presented. US military aid to host countries.
Following 9/11, there has been a large interest in apply- The game-theoretic analysis of terrorism provides a
ing game theory to the study of terrorism. Game theory – number of insights. First, strategic behavior may induce
or the study of strategic rational choice – is an appropriate allies – e.g. commonly targeted governments – to work at
tool to capture the strategic interactions among various cross-purposes (Bueno de Mesquita, 2007; Sandler &
agent pairings – e.g. two governments targeted by the Siqueira, 2006). Second, adversaries may also work at
same terrorist group; a government and its adversarial ter- cross-purposes as each tries to match the response of their
rorist group; rival terrorist groups; the government, the counterpart without gaining any ground (Arce & Sand-
terrorists, and the media; or the government and factions ler, 2005). Third, information plays an important role
within a terrorist group. Table II presents a few novel find- since adversaries are often ill-informed about their coun-
ings from this literature. I favor findings that are either terparts’ resources or preferences (Kydd & Walter,
provocative or counter-intuitive. Most game-theoretic 2002). This lack of information makes signaling and
treatments involved counterterrorism applications, as screening strategies important (Lapan & Sandler,
266 journal of PEACE RESEARCH 51(2)

Table II. Some novel game-theoretic results 1993). Fourth, by taking a long-term viewpoint, terrorist
groups are more likely than targeted governments to
 Increased information by the governments on the
targeting preferences of the common terrorist threat work in conjunction, thereby resulting in terrorist
will worsen defensive allocations as governments are networks (Sandler, 2005). In contrast, democratic gov-
more effective in transferring attacks abroad (Sandler ernments cannot see past the next election, so that agree-
& Lapan, 1988). ments with other governments are not so compelling
 Whether terrorists are able to sabotage peace agreements because the next elected government may not abide by
depends on the level of trust between the government past agreements (Sandler, 2005). Fifth, as more agents
and the moderate terrorists. The ability to sabotage have been added to a game model, theorists have resorted
also hinges on the strength of these moderates and
the orientation of the government (Kydd & Walter,
to multistage games, where each stage typically contains
2002). two active agents.
 Terrorist organizations screen volunteers for quality, so In addition, game theory articles investigated bargain-
that they attract the most capable operatives. Reduced ing between hostage-taking terrorists and governments
economic opportunities allow these groups to obtain (see Sandler, Tschirhart & Cauley, 1983). For example,
better recruits (Bueno de Mesquita, 2005). Lapan & Sandler (1988) studied the practicality of a
 Among two targeted countries, leadership will policy that commits governments never to concede to
exacerbate the undersupply of proactive measures, but
hostage takers’ demands. The conventional support of
it will ameliorate the oversupply of defensive actions.
The net effect of leadership on the efficient supply of the no-concession policy hinges on the notion that if ter-
counterterrorism depends on these opposing rorists know beforehand that they have nothing to gain,
influences (Sandler & Siqueira, 2006). then they will never abduct hostages. The empirical
 Within a country, a centralized allocation is more record shows that governments do offer concessions in
efficient than a noncentralized allocation of violation of their pledge – e.g. the Irangate scandal
defensive measures (Bier, Oliveros & Samuelson, involving the Reagan administration. Lapan & Sandler
2007). (1988) showed that these failures to abide by a stated
 Generally, defensive allocation decisions should be
no-concession policy hinge on a time-inconsistency
made public, so that terrorists are guided to low-
valued targets (Bier, Oliveros & Samuleson, 2007). concern, when the perceived short-run gain from conces-
 Governments overspend on tactic-specific observable sions appears to be greater than the long-run conse-
countermeasures, while they underspend on unob- quences owing to the value of a given hostage – e.g.
servable covert operations (Bueno de Mesquita, CIA agent William Buckley kidnapped on 16 March
2007). 1984 in Beirut, who precipitated the Irangate scandal.
 The attacker’s and defender’s efforts may be strategic Many game-theoretic bargaining propositions have been
complements or strategic substitutes. For comple- tested by Atkinson, Sandler & Tschirhart (1987) and
ments, the attacker’s efforts rise with increases in the
defender’s efforts, so that the defender may not
Gaibulloev & Sandler (2009). The latter article showed
improve its security despite its extra efforts (Zhuang that governments have abided by their no-concession
& Bier, 2007). pledge more often in recent years.
 When a defender must protect N locations from Many of the original empirical studies of terrorism
terrorist attacks, the solution algorithm involves alloc- involved time-series analysis (see e.g. Enders, 2007). As
ating resources among sites to minimize the expected count models, such as Poisson and zero-inflated negative
gain of the terrorists even though the game is not binomial, were developed, these models replaced those
zero sum (Powell, 2007).
based on a normal distribution. After 9/11, there are
 The choice between proactive and defensive counter-
measures by two targeted countries hinges on three many more cross-sectional and panel studies on such
considerations: (i) the relative cost comparisons of the topics as suicide terrorism (Benmelech, Berrebi & Klor,
policies; (ii) the foreign interests of the countries; and 2012), the causes of terrorism (Piazza, 2011), effective-
(iii) the targeting risks of the countries. A high-cost ness of counterterrorism (Dugan & Chenoweth,
defender is more motivated to provide a proactive 2012), and economic consequences of terrorism (Gai-
response, because it suffers greater costs (Bandyopad- bulloev & Sandler, 2008, 2011).
hyay & Sandler, 2011). Another recent research development concerned the
 US military aid to countries hosting a terrorist group
study of networked terrorists. In the late 1960s and the
creates a moral hazard problem for the recipient
country that lengthens the resident group’s lifetime 1970s, terrorist networks cooperated on many levels,
(Bapat, 2011). including training, intelligence, safe haven, financial
support, logistical help, weapon acquisition, and the
Sandler 267

exchange of personnel (Hoffman, 2006). The European 2010). Relevant issues include the interplay between a
left-wing terrorists maintained ties with the Palestinian donor country, which is focused on defensive measures
groups (Alexander & Pluchinsky, 1992). In recent times, at home against an attack launched from abroad, and the
the Al-Qaeda network operates in upward of 60 coun- recipient country, which is focused on proactive mea-
tries and stages its attacks worldwide. These terrorist net- sures to eliminate the resident terrorist group (Bandyo-
works allow tied groups to increase their effectiveness in padhyay, Sandler & Younas, 2011). This interplay is
utilizing limited resources compared to their powerful strategically tied to the donor’s aid package, which is
government adversaries. used not only to bolster the recipient country’s well-
One approach to the study of terrorist networks is to being, but also to finance its proactive efforts. Other ger-
design counterterrorist policies to do the most damage to mane considerations involve the form of the foreign
compromise linkages between the terrorists (Farley, assistance and its influence on the regime stability of the
2003). This approach relies on graph theory and assumes aid recipient. Too much aid tied to counterterrorism
that policy designers have knowledge about the net- may lose the recipient regime its popular support (Ban-
work’s configuration. Moreover, it assumes a static con- dyopadhyay, Sandler & Younas, 2011). In a recent
figuration, where the terrorists do not alter links in empirical study, Young & Findley (2011) showed that
anticipation of policymakers’ goal to disrupt the net- foreign aid reduced transnational terrorism when tar-
work. The focus on networks teaches us that terrorists geted toward education, health, civil society, and conflict
must trade off connectivity against vulnerability (Enders prevention. Based on panel analyses of 22 donor coun-
& Jindapon, 2010). In an all-channel network, every ter- tries, Dreher & Fuchs (2011) showed that foreign aid
rorist is linked to every other terrorist, which facilitates increased after 9/11; however, this aid did not necessarily
complex operations as information can be exchanged flow to the countries with the most terrorist attacks. Sur-
readily. In such a network, a single compromised terror- prisingly, these authors did not find that aid flowed to
ist can provide devastating intelligence on the rest of the the perpetrators’ host countries. Many other aid-related
network. To avoid this vulnerability, terrorist networks issues for the study of terrorism remain.
rely on rather small chains of terrorists who are loosely
linked to the rest of the network (Enders & Sandler,
2012: 249–256). The resulting downside is that planned
Directions for future research
attacks must be rather simple. and concluding remarks
Networks are also relevant in a game-theoretic setting What is the true impact of terrorism on growth? For
to investigate how a global terrorist organization (GTO) regional aggregates, the literature’s consensus is that ter-
delegates local terrorist groups in the field (Siqueira & rorism has a small, but significant, negative impact on
Sandler, 2010). This delegation decision is based on the per capita GDP growth (see e.g. Blomberg, Hess &
GTO’s perceived orientation of the targeted government Orphanides, 2004). There are, however, grounds for
and the fervor of the local supporters for the terrorist believing that terrorism typically has no effect on eco-
group’s goals. If, for example, the targeted government nomic growth – e.g. most countries experience few
is weak with no stomach to fight the terrorists (i.e. it does attacks with little loss of life or property; much of terror-
not increase counterterrorism as attacks increase), and if ism’s impact is localized; and transference of economic
the local supporters appear steadfast, then the GTO activities can limit economic consequences. To date, the
would delegate to a local group, whose views are more studies of this growth impact ignores biases – e.g. Nickell
extreme than its own. If the targeted government and/or bias stemming from lagged per capita income on the
local supporters later changed their orientation, then right-hand side of the growth equation. Another crucial
the GTO may come to regret its delegation decision with bias comes from cross-country dependence which causes
little chance to recall the deployed group. This was the an endogeneity bias. When accounting for these biases,
case with Al-Qaeda’s deployment of al-Zarqawi to Iraq Gaibulloev, Sandler & Sul (2013) found no influence
after he bombed three Jordanian hotels with high Mus- of terrorism on economic growth for a host of regional
lim death tolls. samples. More work is needed because losses in eco-
Because many terrorist groups reside in developing nomic growth are used to gauge offsetting fiscal and
countries with limited means to eradicate them, the use monetary policies.
of foreign aid to calm grievances and to bolster proactive There is also a need for more spatial analysis of terrorist
counterterrorism efforts against a resident group is now incidents and civil wars. Recently, geo-referenced GTD
an important research question (e.g. Azam & Thelan, data were used by Findley & Young (2012) to investigate
268 journal of PEACE RESEARCH 51(2)

the spatial and temporal relationship between terrorist Yet another issue for future research is the study of the
incidents and civil wars. Spatial analysis can indicate the factors that promote international cooperation in the
spread of terrorist campaigns across countries and regions. fight against international terrorism. For example,
The analysis can also identify where vulnerabilities are INTERPOL can coordinate arrest efforts among coun-
the greatest within countries, and how terrorist attacks tries. The aftermath of 9/11 showed that, under dire
respond spatially to counterterrorism measures. threat, nations can cooperate against a common terrorist
There are additional issues concerning counterterror- enemy. For counterterrorism, the role of partial cooper-
ism spending that require investigation. How much is ation needs to be investigated.
enough in terms of defensive spending? That is, have past A final direction for future research involves the devel-
counterterrorism measures been effective and worth the opment of efforts to counter the growing threat of cyber-
cost? Since its inception, the budget of US DHS has terrorism in an increasingly electronic-dependent world.
risen by 9% annually (Enders & Sandler, 2012: 328). This article demonstrates that the analytical study of ter-
To address such questions requires an unobservable rorism is a very active research area that has much policy
counterfactual, in which benefits in terms of inhibited relevance. Event datasets facilitated empirical tests of theo-
attacks are ascertained. The cost side of counterterrorism retical propositions, but underscored a real deficiency –
is readily observable. There is only a single study that i.e. the need for data on governments’ counterterrorism
attempts to compute a counterfactual for post-9/11 actions. There are a few country-specific coun-terterrorism
counterterrorism spending (Sandler, Arce & Enders, datasets (see e.g. Dugan & Chenoweth, 2012), but no glo-
2011). Though this study is imperfect, these authors bal counterterrorism dataset. This article also highlights
found only about a ten cents return on a dollar from select areas of major new developments, as well as future
post-9/11 defensive spending. directions for research.
Datasets, such as ITERATE, GTD, and RAND,
attribute attacks to terrorist groups for the last 40 Replication data
years. Even though less than half of the recorded
The raw data for the figures along with the figures are in
attacks are tied to specific groups, there are now suf-
an Excel file that can be found at http://www.prio.no/
ficient data to investigate the determinants of terrorist
jpr/datasets.
group survival. The pioneering article using survival
(hazard) analysis is by Blomberg, Engel & Sawyer
(2010), with its focus on ‘one hit wonders’ or groups Acknowledgements
that struck just once. Their study investigated how eco- The author has profited from helpful comments pro-
nomic, political, and geographical considerations in the vided by four anonymous reviewers and the two editors
venue country influenced terrorist group longevity. A of the special issue.
follow-up study by Blomberg, Gaibulloev & Sandler
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Sandler 271

Wilkinson, Paul (1986) Terrorism and the Liberal State, revised TODD SANDLER, b. 1946, PhD in Economics (State
edn. London: Frank Cass. University of New York at Binghamton, 1971); Vibhooti
Young, Joseph K & Laura Dugan (2011) Veto players and Shukla Professor of Economics and Political Economy,
terror. Journal of Peace Research 48(1): 19–33. University of Texas at Dallas (2006– ); Robert R and
Young, Joseph K & Michael G Findley (2011) Can peace be Katheryn A Dockson Professor of International Relations
purchased? A sectoral-level analysis of aid’s influence on and Economics, University of Southern California (2000–
transnational terrorism. Public Choice 149(3–4): 365–381. 07); current main interests: international terrorism,
Zhuang, Jun & Vicki M Bier (2007) Balancing terrorism and transnational collective action; most recent (co-authored)
natural disasters: Defensive strategy with endogenous book: The Political Economy of Terrorism, 2nd edn
attacker effort. Operations Research 55(5): 976–991. (Cambridge University Press, 2012).