Is Reaction to Terrorist Attacks a Localized Phenomenon?

Abstract:     
Research found that the terrorist attack of 9/11 was associated with a temporary decline in US Arab and Muslim men’s weekly earnings and real wages of around 9 to 11 per cent. This has been interpreted as an increase in discrimination against those groups following the attack. However, other evidence shows that in Sweden the terrorist attack did not change Middle East immigrants’ job-searching behavior because of increased discrimination from employers. A possible explanation is that, since 9/11 occurred in the US, the reaction against Arab and Muslim men was more severe there than elsewhere, even though nationals from 90 other countries were also killed. Against this background, the purpose of this paper is to examine the labor market experiences of UK-based Arab and Muslim immigrants. They could have been affected by either 9/11 (that killed 67 UK nationals) or the London bombings of 7th July 2005 (that killed 52 UK nationals), or both. Using Quarterly UK Labor Force Survey data, we explore the labor market outcomes of UK-based Arab and Muslim immigrants following both 9/11 and the London bombings. We estimate two difference-in-differences models — one for 9/11, and the other for the London Bombings and carry out the analysis separately for men and women.

The results suggest that, while 9/11 had a lesser impact on the labor market outcomes of UK Arab and Muslim women, the London bombings had a statistically significant negative impact. These findings suggest that physical distance does matter for reaction to terrorist attacks.

Number of Pages in PDF File: 34

Keywords: labor discrimination, migration, labor supply, terrorist attacks

JEL Classification: J02, J07, O15

working papers series