START visiting scholars and two of Morehouse College's economics professors Juliet Elu and Gregory Price found that informal and formal remittances have funded incidents of terrorism and do have a negative impact on economic growth in the region in those instances.
"Remittances can fund other productive investments in human and physical capital," Price said. "If it gets diverted you basically abort that possibility, which then constrains economic growth."
Using data from START's Global Terrorism Database (GTD) and remittance data from the World Bank, the researchers found that for every remittance transfer between $250,000 and $1 million during 1974-2006, that for the typical Sub-Saharan country, one terrorism incident is financed for approximately every one million dollars in remittances.
"If the government can enforce counterterrorism policies so that remittances can go to the right channel, then you can actually obviate incidents of terrorism," Elu said."There are some people who engage in these activities for the money. But there are also people who are not interested in the income; they are interested in advancing their own beliefs."
This study was published in the Peace Economics, Peace Science and Public Policy Journal, Vol. 18.