The impact of counterterrorism spending on domestic terrorism: Evidence from South Asia

The number of terrorist incidents has been rising over the years. Thus counterterrorism is a highly relevant issue. The post-2015 UN development agenda has also identified peace and security as one of the core dimensions of future development. Though empirical research has predominantly focused on transnational terrorism, domestic terrorism constitutes a greater security peril and outnumbers the former in terms of frequency and number of causalities. In our analysis, we examine the impact of public order and safety spending on the incidence of domestic terrorism in South Asia.  South Asia houses some of the most dreaded terrorist groups like Taliban, Lashkar-e-Tayyeba and is the epicentre of the majority of the terrorist incidents. Terrorism in this region is driven by multiple issues like religious fundamentalism, left wing extremism to the desire of secessionism.  We analyse an unbalanced panel of 10 countries over 19 years, 1994- 2012. The terrorism data is taken from Global Terrorism Database (GTD) and the counterterrorism spending data (public order and safety) is from International Monetary Fund’s Global Finance Statistics. We use two alternate measures for incidence of domestic terrorism. First, we use number of incidents, which is widely used in literature. A drawback of this measure is that it does not take into account the intensity of the attacks. Therefore, we also look at an alternate measure of the number of persons killed in domestic terrorism incidents. We do not restrict our analysis to a single definition of domestic terrorism and explore the alternate views on it. We use three definitions of domestic terrorism. Since the incident data is censored below at zero, we use the technique of Tobit for the analysis. The Tobit estimates conditional on trend, document significant negative relationship between spending and domestic terrorism incidents across alternate measures and alternate definitions. This is an important contribution to the debate on whether there is excessive spending on counterterrorism.