Are Lives a Substitute for Livelihoods? Terrorism, Security, and US Bilateral Imports

In this article, we assess the impact of counterterrorism measures on trade. Our work brings three value addition to the literature: (1) it develops a simple theory to emphasize the endogeneity between terrorism acts, counterterrorism measures, and trade; (2) it delivers an original strategy to identify empirically the effect of counterterrorism security measures on trade flows (using third country incidents); and (3) it uses a new data set on business visas issued by the United States to test further the hypothesis that terrorism is affecting trade through the security channel. Our results suggest that counterterrorism security measures matter for US imports. The level of the impact is up to three times higher when the acts result in a relatively high number of victims, when the products are sensitive to shipping time, or when they ask for networks and business people mobility in order to be sold.