The Economic Costs of Separatist Terrorism in Turkey

Abstract

Turkey has been suffering from separatist terrorism and the political conflict it implies since the mid-1980s, both of which are believed to have a negative impact on economic welfare. This article investigates the economic costs of Kurdistan Workers' Party (PKK) terrorism, particularly in the Eastern and Southeastern provinces of Turkey by invoking the synthetic control method. We create a synthetic control group that mimics the socioeconomic characteristics of the provinces exposed to terrorism before the PKK terrorism emerged in the mid-1980s. We then compare the real gross domestic product (GDP) of the synthetic provinces without terrorism to the actual provinces with terrorism for the period 1975 to 2001. Causal inference is carried out by comparing the real per capita GDP gap between the synthetic and actual provinces against the intensity of PKK terrorist activity. Extended over a period of fourteen years (1988 to 2001), we find that after the emergence of terrorism, the per capita real GDP in Eastern and Southeastern Anatolia declined by about 6.6 percent relative to a comparable synthetic Eastern and Southeastern Anatolia without terrorism.