| Summary/Abstract |
Despite scholarly interest in the existence and consequences of the crime-terror nexus, little research has been done to examine how the presence of an illegal economic area, known as a shadow economy, impacts terrorist activity in a country. We propose a theory which argues that terrorists are able to rely on the partnerships and resources available in the shadow economy to increase their organizational capacity. Using data on terrorist activity and the size of the shadow economy, our empirical results show that the larger the shadow economy, the greater the number of overall terrorist attacks, fatalities, and certain types of mass-casualty events that a country experiences.
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