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

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Timothy Besley
Hannes Mueller

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Abstract

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

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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Economic Organisation and Public Policy Discussion Papers Series with number 011.

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Date of creation: May 2009
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Handle: RePEc:cep:stieop:011

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Related research
Keywords: Peace Dividend; Northern Ireland; Conflict; Housing Price; MarkovChain;

Find related papers by JEL classification:
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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  8. Collins, William J. & Margo, Robert A., 2007. "The Economic Aftermath of the 1960s Riots in American Cities: Evidence from Property Values," The Journal of Economic History, Cambridge University Press, vol. 67(04), pages 849-883, December. [Downloadable!]
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  9. Hamilton, James D., 1990. "Analysis of time series subject to changes in regime," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 39-70. [Downloadable!] (restricted)
  10. Sandra E. Black, 1999. "Do Better Schools Matter? Parental Valuation Of Elementary Education," The Quarterly Journal of Economics, MIT Press, vol. 114(2), pages 577-599, May. [Downloadable!] (restricted)
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  11. Bruno Frey & Simon Luechinger & Alois Stutzer, 2009. "The life satisfaction approach to valuing public goods: The case of terrorism," Public Choice, Springer, vol. 138(3), pages 317-345, March. [Downloadable!] (restricted)
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