Abstract
The literature on the effect of shocks on civil conflicts has grown rapidly over the last decade. In this paper, we study the relationship between earthquakes and terrorism. Medium intensity earthquakes can produce an inadequate response on the part of the government and generate, or exacerbate, previous grievances perceived by the population of the affected area. Since destruction of infrastructures in these cases would be limited, the state keeps most of its coercive capacity, which reduces the chances of full-fledged conflict but leaves open the possibility of low intensity rebellious acts such as terrorism. We propose a new algorithm to classify terrorism events as domestic or transnational, and we show that the likelihood of a domestic terrorist events increases with the previous occurrence of an earthquake. Using earthquakes as an instrument for income, we also show that development has a positive and significant effect on the likelihood of terrorist events.