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This paper first introduces a theoretical formalization connecting a polity's income level to terrorism. Our framework can accommodate different underlying assumptions about individual- and society-level grievances, yielding competing hypotheses. We then construct a panel database to study terrorism for 1527 subnational regions in 75 countries between 1970 and 2014. Results consistently imply an inverted U-shape that remains robust to incorporating a comprehensive set of region-level covariates, region- and time-fixed effects, as well as estimating an array of alternative specifications. The threat of terrorism systematically rises as low-income polities become richer, peaking at GDP/capita levels of ≈ US$12,800 (in constant 2005 PPP US$), but then falls consistently above that level. This pattern emerges for domestic and transnational terrorism alike. While peaks differ by perpetrator ideology, the inverted U shape also prevails across ideology-specific subsamples. In sum, alleviating poverty may first exacerbate terrorism, contrary to much of the proposed recipes advocated since 9/11. [ABSTRACT FROM AUTHOR]

This paper studies the effects of foreign direct investment (FDI) on domestic terrorism. Using a cross-national, time-series analysis of 114 countries from 1991–2017, and employing structural equation modeling to test a number of mediating factors, we find that the impact of FDI on domestic terrorism depends on the host state's level of economic development. For host countries at higher-income levels, FDI boosts economic development and global integration promoting prosperity, increasing counterterrorism resources, and reducing the economic grievances that foster terrorism. Conversely, for lower-income host countries, increased FDI fuels higher domestic terrorism, as it intensifies clashes between traditional and modern elements within society, raises economic discrimination, heightens perceptions of economic insecurity, and subsequently leads to grievances directed against the state. Our results indicate a curvilinear relationship between FDI inflows and domestic terrorism, suggesting that FDI produces a double-edged sword between promoting economic development and increasing domestic terrorism in host states. [ABSTRACT FROM AUTHOR]