The Impact of Terrorism across Industries: An Empirical Study

40 Pages Posted: 26 Jan 2006  

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: November 2005

Abstract

This paper uses scoring matching techniques and event study analysis to elucidate the impact of terrorism across different economic sectors. Using the Israeli-Palestinian conflict as a case study, we differentiate between Israeli companies that belong to the defense, security or anti-terrorism related industries and other companies. The findings show that whereas terrorism has a significant negative impact on non defense-related companies, the overall effect of terrorism on defense and security-related companies is significantly positive. Similarly, using panel data on countries' defense expenditures and imports from Israel, we find that terror fatalities in Israel have a positive effect on Israeli exports of defense products. These results suggest that the expectation of future high levels of terrorism has important implications for resource allocation across industries.

Keywords: Terrorism, stocks returns, defense sector

JEL Classification: D74, G14, L64, P16

Suggested Citation

Berrebi, Claude and Klor, Esteban F., The Impact of Terrorism across Industries: An Empirical Study (November 2005). CEPR Discussion Paper No. 5360. Available at SSRN: https://ssrn.com/abstract=878544

Claude Berrebi (Contact Author)

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 )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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