Konstantinos Drakos, Cathérine Müller
We investigate whether differences in terrorism risk are mirrored on terrorism risk perception across European countries for the period 2003-2007. We find that the average propensity for terrorism risk concern is affected by actual risk levels. Further, country and individual heterogeneity contribute substantially to the variation of observed risk perception. According to our findings males, singles and individuals with white collar jobs are less likely to mention terrorism as one of the most pressing issues their country faces. In contrast, political positioning towards the right end of the spectrum and living in rural areas make it more likely to be concerned about terrorism. As far as competing risks are concerned, we find that the likelihood terrorism is mentioned increases when competing risks' drivers are also increases such as taxation, inflation, unemployment and poverty risk at work. In contrast, terrorism is less likely to be mentioned when the determinants of crime, immigration rates, housing costs and pensions are higher. Finally, based on the Bayesian framework we also examined the formation of terrorism risk perceptions, and decompose the observed country level time series of terrorism activity into a long and a short run component. We concluded that the observed risk perception variation is only explained by the cyclical part of terrorism activity countries face.
Keywords: probit, survey data, terrorism risk concern, time series decomposition
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