partners, but less harmful to big partners. Table 6, column 3, shows indeed that when the GDP of the partner increases the effect of terrorism incidents that originate from the latter decreases on US imports<sup>18</sup> . This size effect does not alter however that of the high-number of victims. This suggest then that the country size effect does matter but for incidents that do not result in a high number of victims.

Second, if terrorism increases security controls at the borders then we expect terrorism acts to result in higher time spent at the borders. Thus, time-sensitive products should be much more affected by terrorism than time-insensitive ones. We take advantage from a study by Hummels (2002) where he estimates the average sensitivity of days spent in transport on trade at the SITC2 product level. We classify those products where time-sensitivity of trade is higher than -0.01 (and statistically significant) into a time-sensitive product category and the rest, usually around 0.005, into a timeinsensitive categorie<sup>19</sup> . Table 6 again, shows that indeed time-sensitive products are more sensitive to terrorism acts than the rest. They are even more than 4 times more sensitive when the number of victims per incident is very high.

Third, we expect that terrorism against the US affects networks formation between the latter and the country of origin, if terrorism results in lower issuing visas and higher visa controls at the borders. Thus, if security at the border matters, we expect products that ask for networks and where market information is costly (i.e. needs more labor mobility) to be more sensitive to terrorism acts in the past than those products negotiated on global markets where information on prices and quantities is readily available. We thus split the sample by three sets of products classified by Rauch (1996) into products in organized exchange, referenced prices products and differentiated products. Table 6 shows the result for the three subsamples: In the case of organized exchange products, the impact of incidents is insignificant even when they result in a high number of victims. In the case of referenced price products, the impact is as high as for differentiated products (semi elasticity around 52). In the latter case however, when those acts result in a high number of victims, the interaction term shows that the sensitivity to terrorism acts is 5 times higher.

This last result is interesting to discuss in the perspective of the alternative boycott explanation of the effect of terrorism on bilateral trade flows. If indeed, a change in US consumers’ preferences is the explanation of the negative impact on US imports of terrorist incidents emanating from origin countries, then we should expect this boycott effect to be stronger on standard and referenced goods than on differentiated products, as the first can be more easily substituted towards alternative supply sources. The fact that the impact of terrorist incidents on differentiated products is stronger than on standard products, suggests on the contrary that a change in US consumers preferences is unlikely to be an important explanation of the negative impact of transnational terrorism on US bilateral trade flows The following section goes further in confirming that the security channel is more empirically

> 18We also find the same qualitative result when we interact the third incidents variable with a dummy that takes on 1 when the size of the country in terms of GDP is higher than the median size country. 19 Standard error of the estimates were not provided. Hence, we could not compare statistically the level of estimators with each others. That is why we have chosen the threshold method where 0.01 seemed to be a clear cut between insensitive and sensitive-time products.

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