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Terrorism Financing, Recruitment, and Attacks

Journal: Econometrica

Date: 20220701

Author: Limodio, Nicola

Abstract:
This paper investigates the effect of terrorism financing and recruitment on attacks. I exploit a Sharia-compliant institution in Pakistan, which induces unintended and quasi-experimental variation in the funding of terrorist groups through their religious affiliation. The results indicate that higher terrorism financing, in a given location and period, generate more attacks in the same location and period. Financing exhibits a complementarity in producing attacks with terrorist recruitment, measured through data from Jihadist-friendly online for a and machine learning. A higher supply of terror is responsible for the increase in attacks and is identified by studying groups with different affiliations operating in multiple cities. These findings are consistent with terrorist organizations facing financial frictions to their internal capital market.

Link: Google Scholar

Key Findings

Terrorism Financing Impact

Higher terrorism financing in Sunni-majority cities during Ramadan leads to 0.4% higher probability of attacks and 2% more terror incidents when silver prices are high

Capital Intensive Attacks

Increased funding primarily drives capital intensive attacks (bombings, armed assaults) rather than non-capital intensive incidents

Cash & Recruitment Effects

Cities with more cash-based charities show 3-6x larger terrorism effects, with attacks increasing significantly when both financing and recruitment are high

Attack Patterns During Ramadan

  • Probability of attack increases by 0.24% in Sunni-majority cities during Ramadan
  • Number of attacks increases by 1.12% during this period
  • Casualty numbers rise by 0.87% on average

Capital vs Non-Capital Intensive Attacks

  • Capital intensive attacks show 0.17% higher probability during financing periods
  • Non-capital intensive attacks only increase by 0.06%
  • Demonstrates clear preference for capital intensive operations when funding increases

Cash-Based Charity Impact

  • Areas with high cash-based charities show 1.47% higher attack probability
  • Number of attacks increases by 6.61% in these regions
  • Demonstrates amplification effect of cash-based charitable operations

Contribution and Implications

  • First empirical evidence linking terrorism financing to attack patterns through quasi-experimental variation
  • Demonstrates importance of financial frictions in constraining terrorist operations
  • Highlights need for oversight of charitable organizations and cash-based transactions
  • Supports value of financial counterterrorism strategies

Data Sources

  • Attack patterns visualization based on Table III coefficients showing baseline effects during Ramadan
  • Capital vs non-capital intensive comparison drawn from Table IV showing differential effects by attack type
  • Cash charity impact visualization constructed using coefficients from Table V showing interaction effects with charity characteristics