The Economic Cost of Harboring Terrorism

32 Pages Posted: 3 Nov 2009 Last revised: 10 Nov 2009

See all articles by Efraim Benmelech

Efraim Benmelech

Northwestern University - Kellogg School of Management; National Bureau of Economic Research (NBER)

Claude Berrebi

RAND Corporation; Hebrew University - The Federmann School of Public Policy and Government; University of California, Los Angeles (UCLA) - Department of Economics; Princeton University - Department of Economics; RAND Corporation - Labor and Population Studies

Esteban F. Klor

Hebrew University of Jerusalem - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: October 2009

Abstract

The literature on conflict and terrorism has paid little attention to the economic costs of terrorism for the perpetrators. This paper aims to fill that gap by examining the economic costs of committing suicide terror attacks. Using data covering the universe of Palestinian suicide terrorists during the second Palestinian uprising, combined with data from the Palestinian Labor Force Survey, we identify and quantify the impact of a successful attack on unemployment and wages. We find robust evidence that terror attacks have important economic costs. The results suggest that a successful attack causes an increase of 5.3 percent in unemployment, increases the likelihood that the district's average wages fall in the quarter following an attack by more than 20 percent, and reduces the number of Palestinians working in Israel by 6.7 percent relative to its mean. Importantly, these effects are persistent and last for at least six months after the attack.

Suggested Citation

Benmelech, Efraim and Berrebi, Claude and Klor, Esteban F., The Economic Cost of Harboring Terrorism (October 2009). NBER Working Paper No. w15465. Available at SSRN: https://ssrn.com/abstract=1498966

Efraim Benmelech (Contact Author)

Northwestern University - Kellogg School of Management ( email )

Evanston, IL 60208
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Claude Berrebi

RAND Corporation ( email )

Santa Monica, CA
310-393-0411 (Phone)

HOME PAGE: http://www.rand.org/about/people/b/berrebi_claude.html

Hebrew University - The Federmann School of Public Policy and Government

Hebrew University
Mount Scopus
Jerusalem, 91905
Israel

University of California, Los Angeles (UCLA) - Department of Economics ( email )

Box 951477
Los Angeles, CA 90095-1477
United States

HOME PAGE: http://www.econ.ucla.edu/people/Faculty/Berrebi.html

Princeton University - Department of Economics ( email )

Industrial Relations Section
Princeton, NJ 08544
United States
609-258-4777 (Phone)
609-258-2907 (Fax)

HOME PAGE: http://www.princeton.edu/~cberrebi

RAND Corporation - Labor and Population Studies ( email )

1776 Main Street
Santa Monica, CA
United States
310-393-0411 (Phone)

Esteban F. Klor

Hebrew University of Jerusalem - Department of Economics ( email )

Mount Scopus
Jerusalem, 91905
Israel
+972 2 588 3143 (Phone)
+972 2 581 6071 (Fax)

HOME PAGE: http://economics.huji.ac.il/facultye/klor/klor.htm

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
16
Abstract Views
334
PlumX Metrics