Terrorism Financing, Recruitment and Attacks

This paper investigates the effect of terrorism financing and recruitment on attacks. A Sharia-compliant institution in Pakistan induces exogenous variation in the funding of terrorist groups through their religious affiliation. I isolate the supply of terrorist attacks by following multiple terrorist groups with different affiliations operating in various cities. Higher terrorism financing, in a given location and period, generates more attacks in the
same location and period. This effect increases in recruitment, measured through dark-web data, inputs by two judges and machine-learning. I estimate the elasticity of terroristattacks to financing (0.25), indicating that financial counter-terrorism can lower attacks.