Daniel Auer, Daniel Meierrieks
Merchants of death: Arms imports and terrorism

European Economic Review, 2021: 137, (article no. 103813)
ISSN: 0014-2921 (print), 1873-572X (online)

Do arms imports fuel terrorism? Despite the high human, economic and political toll associated with terrorism, the effect of a country’s arms trade on the propensity to experience terrorist attacks has received scant attention so far. We argue that arms imports affect a country’s institutional landscape, increasing grievances due to corruption, exclusion and human rights violations; these grievances, in turn, incite terrorism. We leverage plausibly exogenous variation in global arms trade patterns as an instrument to provide causal evidence of a significant positive effect of arms imports on terrorist activity for 179 countries between 1992 and 2018. We also show that arms imports indeed increase corruption and political exclusion, which may explain why arms imports ultimately encourage terrorist activity. Finally, the adverse effect of arms imports on terrorism is strongest among countries characterized by low levels of fiscal capacity and high levels of political inequality and authoritarianism.