Endnotes

¹For general principles on the influences of intrastate conflicts on economic growth, see Sambanis (2002).

²Government spending is not an ideal measure of national security spending on internal and external threats. Unfortunately, we are not aware of better data that accurately disaggregate conflict-related and other expenditures. An alternative might be to use military spending data. In fact, we employed military spending at an earlier stage of this study and the results were not significant. Military spending is not an adequate measure for several reasons. Most notably, the data do not include all security spending, especially that on homeland security. In addition, our use of military spending substantially reduced the sample information: military expenditure data start from 1988 and are either incomplete or missing for almost half of our sample.

³Sample countries include Afghanistan; Armenia; Australia*; Azerbaijan; Bangladesh; Bhutan; Brunei; Cambodia; People’s Republic of China; Fiji Islands; Georgia; Hong Kong, China*; India; Indonesia; Japan*; Kazakhstan; Kiribati; Republic of Korea*; Kyrgyz Republic; Lao People’s Democratic Republic; Malaysia; Maldives; Micronesia (Federated States); Mongolia; Nepal; New Zealand*; Pakistan; Palau; Papua New Guinea; the Philippines; Samoa; Singapore*; Solomon Islands; Sri Lanka; Taipei,China*; Tajikistan; Thailand; Tonga; Turkmenistan; Uzbekistan; Vanuatu; and Socialist Republic of Viet Nam. Note * indicates developed country.

⁴GTD1 (1970–1997) is available from Inter-University Consortium for Political and Social Research; GTD2 (1998–2004) is available at http://www.start.umd.edu/data/gtd.

⁵More specifically, we tested the null hypothesis of no country-specific effects, no time-specific effects, no joint country-specific and time-specific effects, no country-specific effects conditional on the presence of timespecific effects, and no time-specific effects conditional on the presence of country-specific effects.

⁶In general, inclusion of time dummies in government spending regressions does not affect our conclusion on terrorism and conflict.

⁷Our results for all three estimation equations were broadly consistent if we repeated the panel regressions using robust standard errors or if we reran the models with openness and investment shares not lagged.

⁸Investment models were estimated using the one-way (country) fixed effects, because time effects were not statistically significant. The qualitative results do not change if we included year-specific dummies. We also estimated growth and investment models using the random-effects estimator, insofar as the Hausman test did not reveal an endogeneity problem. The results from Table 7 generally hold, except for external conflict which becomes marginally significant at the .10 level in the growth equation.

⁹The growth and government spending models were estimated using one-way (country) fixed effects because the time effects were not statistically significant. Adding time dummies did not change the findings. For the government expenditure share models, we also estimated the models using the random-effects estimator—the results were virtually identical to those in Table 8.

¹⁰One reason for including regime type was to avoid a possible omitted variable bias problem: democracy may influence growth and may also correlate with political violence variables.

¹¹We thank the reviewer for suggesting this additional need for cooperation.

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