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Assassinations: Evaluating the Effectiveness of an Israeli Counterterrorism Policy Using Stock Market Data

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  • Asaf Zussman
  • Noam Zussman

Abstract

Since the outbreak of the Intifada in September 2000, the Israeli government has extensively employed a policy of assassinating members of Palestinian terrorist organizations. Theoretically, the net effect of an assassination on future terrorism is indeterminate because it embodies two conflicting effects: the assassination of a terrorist hurts his organization's capabilities, but may increase the motivation for future attacks. Our indirect, empirical evaluation of the effectiveness of assassinations for Isreali counterterrorism is based on Israeli stock market reactions to news of such operations. We rely on the fact that terrorism has had significant adverse effects on the Israeli economy and claim that the stock market should react positively to news about effective counterterrorism measures but negatively to news about counterproductive ones. We find that the market does not react to assassinations of low-ranked members of Palestinian terrorist organizations. The market does react strongly, however, to the assassinations of senior leaders of terrorist organizations: it declines following assassinations targeting senior political leaders but rises following assassinations of senior military leaders. To the extent that these reactions reflect expectations regarding future levels of terrorism they imply that the market perceives the first type of assassinations as counterproductive, but the second as an effective measure in combating terrorism.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.20.2.193
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 20 (2006)
Issue (Month): 2 (Spring)
Pages: 193-206

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Handle: RePEc:aea:jecper:v:20:y:2006:i:2:p:193-206

Note: DOI: 10.1257/jep.20.2.193
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  1. Jaeger, David A. & Paserman, Daniele, 2005. "The Cycle of Violence? An Empirical Analysis of Fatalities in the Palestinian-Israeli Conflict," IZA Discussion Papers 1808, Institute for the Study of Labor (IZA).
  2. Eckstein, Zvi & Tsiddon, Daniel, 2004. "Macroeconomic Consequences of Terror: Theory and the Case of Israel," CEPR Discussion Papers 4427, C.E.P.R. Discussion Papers.
  3. Berrebi, Claude & Klor, Esteban F, 2005. "The Impact of Terrorism Across Industries: An Empirical Study," CEPR Discussion Papers 5360, C.E.P.R. Discussion Papers.
  4. Eldor, Rafi & Melnick, Rafi, 2004. "Financial markets and terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 367-386, June.
  5. Asaf Zussman & Noam Zussman & Morten Orregaard Nielsen, 2008. "Asset Market Perspectives on the Israeli-Palestinian Conflict," Economica, London School of Economics and Political Science, vol. 75(297), pages 84-115, 02.
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