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The Economic Cost of Harboring Terrorism

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Author Info
Efraim Benmelech
Claude Berrebi
Esteban F. Klor

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Abstract

The literature on conflict and terrorism has paid little attention to the economic costs of terrorism for the perpetrators. This paper aims to fill that gap by examining the economic costs of committing 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, we identify and quantify the impact of a successful attack on unemployment and wages. We 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 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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15465.

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Date of creation: Oct 2009
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Handle: RePEc:nbr:nberwo:15465

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Find related papers by JEL classification:
H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
O1 - Economic Development, Technological Change, and Growth - - Economic Development
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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This page was last updated on 2009-11-25.

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