Estimating the Peace Dividend: The Impact of Violence on House Prices in Northern Ireland

48 Pages Posted: 3 Feb 2010

See all articles by Timothy J. Besley

Timothy J. Besley

London School of Economics & Political Science (LSE) - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Hannes Felix Mueller

Instituto de Análisis Económic (IAE) Barcelona

Date Written: May 2009

Abstract

This paper exploits data on the pattern of violence across regions and over time to estimate the impact of the peace process in Northern Ireland on house prices. We begin with a linear model that estimates the average treatment effect of a conflictrelated killing on house prices - showing a negative correlation between house prices and killings. We then develop an approach based on an economic model where the parameters of the statistical process are estimated for a Markov switching model where conflict and peace are treated as a latent state. From this, we are able to construct a measure of the discounted number of killings which is updated in the light of actual killings. This model naturally suggests a heterogeneous effect of killings across space and time which we use to generate estimates of the peace dividend. The economic model suggests a somewhat different pattern of estimates to the linear model. We also show that there is some evidence of spillover effects of violence in adjacent regions.

JEL Classification: D74, 016, P16

Suggested Citation

Besley, Timothy J. and Mueller, Hannes Felix, Estimating the Peace Dividend: The Impact of Violence on House Prices in Northern Ireland (May 2009). LSE STICERD Research Paper No. EOPP011, Available at SSRN: https://ssrn.com/abstract=1546905

Timothy J. Besley (Contact Author)

London School of Economics & Political Science (LSE) - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

Hannes Felix Mueller

Instituto de Análisis Económic (IAE) Barcelona ( email )

Barcelona, Bellaterra 08193
Spain

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