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Household Economic Decisions under the Shadow of Terrorism

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Author Info
Dimitrios Christelis () (University of Salerno and CSEF)
Dimitris Georgarakos (Goethe University Frankfurt and CFS)

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Abstract

We investigate, using the 2002 US Health and Retirement Study, the factors influencing individuals’ insecurity and expectations about terrorism, and study the effects these last have on households’ portfolio choices and spending patterns. We find that females, the religiously devout, those equipped with a better memory, the less educated, and those living close to where the events of September 2001 took place worry a lot about their safety. In addition, fear of terrorism discourages households from investing in stocks, mostly through the high levels of insecurity felt by females. Insecurity due to terrorism also makes single men less likely to own a business. Finally, we find evidence of expenditure shifting away from recreational activities that can potentially leave one exposed to a terrorist attack and towards goods that might help one cope with the consequences of terrorism materially (increased use of car and spending on the house) or psychologically (spending on personal care products by females in couples).

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Publisher Info
Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 213.

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Date of creation: 07 Jan 2009
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Handle: RePEc:sef:csefwp:213

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Related research
Keywords: terrorism; expectations; household finance; demand analysis;

Other versions of this item:

Find related papers by JEL classification:
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D14 - Microeconomics - - Household Behavior - - - Personal Finance
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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