Remittances and the Financing of Terrorism In Sub-Saharan Africa: 1974 - 2006

Abstract

Remittances have been recognized as an important determinant of economic growth for Sub-Saharan African economies as they can finance other determinants that constitute drivers of growth. To the extent that remittances finance terrorism, they can also inhibit economic growth as terrorism can constrain important drivers of growth such as investment and consumption expenditures. In this paper, we appeal to a theory of rational terrorism and consider whether remittances to Sub-Saharan Africa finance terrorism. We estimate the parameters of a static and dynamic terrorism incident supply function with maximum likelihood and Generalized Estimating Equation count data estimators for Sub-Saharan Africa between 1974 and 2006. Our parameter estimates suggest that for Sub-Saharan Africa, remittances are a source of finance for terrorism. We find that approximately one terrorism incident is financed in Sub-Saharan Africa for remittance inflows that range between approximately one quarter of a million dollars and one million dollars.