Politically motivated violence has important economic effects. Apart from the direct impact of terrorism on its victims, it deters investment in education and businesses. And the fear of violence has driven millions of people away from their homes every year, subjecting them to terrible hardships.

The economic effects of violence can also be felt in the wider economy. Political violence fuels an element of fear that amplifies the effects of individual attacks. As fear spreads, citizens may question whether governments have the power to provide security, which can have further detrimental economic effects.

Studying these issues is important but difficult without the right kind of data. The fear of violence can be spread by information in the media and online, but quantifying sentiments is extremely hard.  In addition, high-quality data on the economic activity that is affected by such sentiments is typically scarce in countries where violence is most prevalent.

Read the full article about how political violence affects spending patterns by Timothy Besley at mastercardcenter.org.