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α: calibrated so average coauthorship-adjusted count equals average raw count
We consider the effects of terrorism in a home nation and in its neighbors on the home nation's imports. We find that a 10% increase in terrorist attacks in a neighboring nation reduces a country's imports from the rest of the world by approximately $320 million USD, on average. Mediation analysis shows that trading delays is a potential channel of transmission of trade costs of terrorism to a neighbor. We also present a monopolistically competitive theoretical model to throw light on our empirical results.