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The Economic Cost of Harboring Terrorism

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Author Info

  • Efraim Benmelech

    ()
    (Department of Economics, Harvard University, Cambridge, MA, USA)

  • Claude Berrebi

    (RAND Corporation, Santa Monica, CA, USA)

  • Esteban F. Klor

    (Department of Economics, Hebrew University, Jerusalem, Israel)

Abstract

The literature on conflict and terrorism has paid little attention to the economic costs of terrorism for the perpetrators. This article aims to fill that gap by examining the economic costs of harboring 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, the authors identify and quantify the impact of a successful attack on unemployment and wages. They 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 20.0 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.

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Bibliographic Info

Article provided by Peace Science Society (International) in its journal Journal of Conflict Resolution.

Volume (Year): 54 (2010)
Issue (Month): 2 (April)
Pages: 331-353

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Handle: RePEc:sae:jocore:v:54:y:2010:i:2:p:331-353

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Web page: http://pss.la.psu.edu/

Related research

Keywords: economic costs; suicide terrorism; harboring;

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References

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  1. Eric D. Gould & Esteban F. Klor, 2009. "Does Terrorism Work?," HiCN Working Papers 67, Households in Conflict Network.
  2. Benmelech, Efraim & Berrebi, Claude & Klor, Esteban F., 2010. "Economic Conditions and the Quality of Suicide Terrorism," CEPR Discussion Papers 7995, C.E.P.R. Discussion Papers.
  3. Hartog,Joop & Maassen van den Brink,Henriëtte (ed.), 2007. "Human Capital," Cambridge Books, Cambridge University Press, number 9780521873161, April.
  4. Eckstein, Zvi & Tsiddon, Daniel, 2004. "Macroeconomic consequences of terror: theory and the case of Israel," Journal of Monetary Economics, Elsevier, vol. 51(5), pages 971-1002, July.
  5. Abadie, Alberto & Gardeazabal, Javier, 2005. "Terrorism and the World Economy," DFAEII Working Papers 2005-19, University of the Basque Country - Department of Foundations of Economic Analysis II.
  6. Arye Hillman, 2007. "Economic and security consequences of supreme values," Public Choice, Springer, vol. 131(3), pages 259-280, June.
  7. Jones, Benjamin & Olken, Benjamin, 2007. "Hit or Miss? The Effect of Assassinations on Institutions and War," CEPR Discussion Papers 6298, C.E.P.R. Discussion Papers.
  8. M. Daniele Paserman & Esteban F. Klor & Sami H. Miaari & David A. Jaeger, 2011. "The struggle for Palestinian hearts and minds: Violence and public opinion in the Second Intifada," Boston University - Department of Economics - Working Papers Series WP2011-047, Boston University - Department of Economics.
  9. Eli Berman, 2000. "Sect, Subsidy, And Sacrifice: An Economist'S View Of Ultra-Orthodox Jews," The Quarterly Journal of Economics, MIT Press, vol. 115(3), pages 905-953, August.
  10. Claude Berrebi & Esteban F. Klor, 2008. "The Impact of Terrorism on the Defense Industry," Working Papers 597, RAND Corporation Publications Department.
  11. Keefer,Philip & Loayza,Norman (ed.), 2008. "Terrorism, Economic Development, and Political Openness," Cambridge Books, Cambridge University Press, number 9780521887588, April.
  12. Abadie, Alberto, 2004. "Poverty, Political Freedom, and the Roots of Terrorism," Working Paper Series rwp04-043, Harvard University, John F. Kennedy School of Government.
  13. Alberto Abadie & Javier Gardeazabal, 2003. "The Economic Costs of Conflict: A Case Study of the Basque Country," American Economic Review, American Economic Association, vol. 93(1), pages 113-132, March.
  14. Khusrav Gaibulloev & Todd Sandler, 2009. "The Impact Of Terrorism And Conflicts On Growth In Asia," Economics and Politics, Wiley Blackwell, vol. 21(3), pages 359-383, November.
  15. Benjamin F. Jones & Benjamin A. Olken, 2005. "Do Leaders Matter? National Leadership and Growth Since World War II," The Quarterly Journal of Economics, MIT Press, vol. 120(3), pages 835-864, August.
  16. Efraim Benmelech & Claude Berrebi, 2007. "Human Capital and the Productivity of Suicide Bombers," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 223-238, Summer.
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Citations

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Cited by:
  1. Efraim Benmelech & Claude Berrebi & Esteban F. Klor, 2010. "Economic Conditions and the Quality of Suicide Terrorism," NBER Working Papers 16320, National Bureau of Economic Research, Inc.
  2. Etkes, Haggay, 2011. "The impact of employment in Israel on the Palestinian labor force (2005–08)," MPRA Paper 34681, University Library of Munich, Germany.
  3. M. Daniele Paserman & Esteban F. Klor & Sami H. Miaari, 2011. "Can Militants Use Violence to Win Public Support? Evidence from the Second Intifada," Boston University - Department of Economics - Working Papers Series WP2011-046, Boston University - Department of Economics.
  4. Caruso Raul & Klor Esteban F., 2012. "Political Economy Studies on the Israeli-Palestinian Conflict: Introduction," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 18(2), pages 1-10, August.
  5. Cali, Massimiliano & Miaari, Sami H., 2013. "The labor market impact of mobility restrictions : evidence from the West Bank," Policy Research Working Paper Series 6457, The World Bank.
  6. Etkes Haggay, 2012. "The Impact of Employment in Israel on the Palestinian Labor Force," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 18(2), pages 1-36, August.
  7. Claude Berrebi & Esteban F. Klor, 2011. "Does Harboring Terrorists Have Economic Costs?," EUSECON Policy Briefing 12, DIW Berlin, German Institute for Economic Research.
  8. Efraim Benmelech & Claude Berrebi & Esteban Klor, 2010. "Counter-Suicide-Terrorism: Evidence from House Demolitions," NBER Working Papers 16493, National Bureau of Economic Research, Inc.
  9. Claude Berrebi & Esteban F. Klor, 2012. "Do Poor Economic Conditions Affect Terrorism?," EUSECON Policy Briefing 15, DIW Berlin, German Institute for Economic Research.

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