We find that political freedom has a significant and non-linear effect on domestic terrorism, but has no statistically significant effect on transnational terrorism. Geography and fractionalization limit a country's ability to curb terrorism, while strong legal institutions deter terrorism.

We examine the effect of relaxing a binding borrowing constraint for a recipient country on the amount of foreign aid, in a two-country, two-period, trade-theoretic framework. The relaxation unambiguously reduces the flow of foreign aid.