Abstract
For some terrorism has become the daily part of their lives. This thesis attempts to find a relationship as to why some would be motivated to commit such acts. We present an argument of relative economic deprivation (REDI), leading to anger frustration and thereby motivating individuals to commit acts of terrorism to change their status quo. This thesis uses unbalanced panel data across 126 countries spanning 1970 to 2011 to estimate the relationship between REDI and counts of terrorism events. This study models terrorism data using negative binomial models, Zero-inflated negative binomial models, and fixed effects negative binomial models. In addition, we have implement principal component analysis (PCA) to create a relative economic deprivation index since the factors that determine REDI are likely highly collinear (i.e., gross domestic product per capita, loss of purchasing power measured through inflation, and income distribution measured through Gini index). Furthermore, we control for political factors, domestic instability factors, and demographic factors. Domestic instability factors are categorized into two hypotheses, failed state hypothesis and escalation effect hypothesis. We find that increase in REDI is a statistically significant predictor of counts of terrorism events, suggesting that when a group of people within a country feel deprived through a decrease in gross domestic product per capita, an increase in inflation, and an increase in Gini index, that country is likely to experience higher counts of terrorism events. Moreover, this study finds evidence supporting the failed state hypothesis, where a country experiencing ethnic or revolutionary war is likely to experience higher counts of terrorism events. Furthermore, our results suggest that increase religious fractionalization has a decreasing effect on counts of terrorism events. This thesis puts forward that when implementing policies to lower terrorism levels, policy makers should focus on the promotion of greater income growth, stability in prices, higher distribution of wealth, and religious tolerance.