Manufacturing industry and terrorism: a mediation model

The manufacturing sector plays a crucial role in industrial development, innovation and the labour market of an economy. A negative exogenous shock affecting this sector can have significant consequences on a country’s economic growth. In this article, we examine the impact of terrorist attacks on manufacturing productivity in a panel of 216 countries between 1970 and 2020. Using mediation models, our results highlight several mechanisms of influence. By affecting key economic factors such as foreign investments, skilled labour migration, supply chain disruptions, and rising security costs, terrorist attacks hinder manufacturing productivity. However, these effects may vary depending on the target of the attack (civilian or state) and the country’s level of economic development.