The economic costs of terrorism: evidence from the Xinjiang Uygur Autonomous Region in China

Abstract

ABSTRACT I investigate the economic influence of terrorism in China using the synthetic control method pioneered by Abadie and Gardeazabal (2003). Organized terrorist attacks began in 1996 in China’s Xinjiang Uygur Autonomous Region. Comparing actual Xinjiang with a synthetic control without terrorism, I find that terrorist attacks have a pernicious effect on Xinjiang’s economic growth, leading to a loss of 38% of Xinjiang’s GDP per capita in 2018. My result challenges the traditional view that economic growth is not significantly affected by terrorism.