The relationship between terrorism and savings is conceptually ambiguous.
Abstract
Terrorism can either lower savings by increasing perceived associated risks or result in more precautionary savings as a coping strategy. A scarce empirical literature fails to resolve this ambiguity.
Alberto addresses it by differentiating between formal and informal savings. Alberto argues that individuals perceive formal institutions (banks) as more likely to fall to terrorism than informal channels. Therefore, when looking to increase precautionary savings in the aftermath of terrorism, individuals will disproportionally opt for informal avenues.
Using data from the Nigerian General Household Survey Panel matched to data from the Global Terrorism Database, Alberto shows evidence that supports this hypothesis. Alberto adopts a dose response difference-in-difference model, which exploits the variation in terrorism events within and between 500 5-kilometer-squared locations over 2010-2018.
The results are robust to several exercises, including to potential bias from heterogeneous time-dependent and dynamic treatment effects.
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