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Small investment and large returns: Terrorism, media and the economy

  • Melnick, Rafi
  • Eldor, Rafi

The study investigates the role of the media in the impact of terrorism on the economy. A unique data set of the newspaper articles that reported terrorist attacks during 2002 is used to evaluate their impact on the Tel Aviv Stock Exchange. An econometric analysis is performed in order to understand how a newspaper decides to cover a terrorist attack, i.e. the number of articles, positioning of articles, whether to include photos and the size of headlines. It was found that media coverage is an important channel through which terrorism produces economic damage. The findings also showed that the economic damage caused by terrorist attacks increases monotonically with the amount of media coverage. It was also found that the economic impact of the media coverage diminishes over time.

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File URL: http://www.sciencedirect.com/science/article/B6V64-4YT6D96-1/2/2743fe1b81fe31c0de8b80b89e1091b0
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Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 54 (2010)
Issue (Month): 8 (November)
Pages: 963-973

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Handle: RePEc:eee:eecrev:v:54:y:2010:i:8:p:963-973
Contact details of provider: Web page: http://www.elsevier.com/locate/eer

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  1. Bruno S. Frey & Simon Luechinger & Alois Stutzer, 2004. "Calculating Tragedy: Assessing the Costs of Terrorism," CREMA Working Paper Series 2004-23, Center for Research in Economics, Management and the Arts (CREMA).
  2. Claude Berrebi & Esteban F. Klor, 2008. "Are Voters Sensitive to Terrorism?: Direct Evidence from the Israeli Electorate," Working Papers 477-1, RAND Corporation Publications Department.
  3. 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.
  4. 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.
  5. 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.
  6. David Fielding & Anja Shortland, 2009. "Does television terrify tourists? Effects of US television news on demand for tourism in Israel," Journal of Risk and Uncertainty, Springer, vol. 38(3), pages 245-263, June.
  7. David A. Jaeger & M. Daniele Paserman, 2005. "Israel, the Palestinian Factions, and the Cycle of Violence," Working Papers 23, Department of Economics, College of William and Mary.
  8. Asaf Zussman & Noam Zussman, 2006. "Assassinations: Evaluating the Effectiveness of an Israeli Counterterrorism Policy Using Stock Market Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 193-206, Spring.
  9. Eldor, Rafi & Melnick, Rafi, 2004. "Financial markets and terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 367-386, June.
  10. Thomas Eisensee & David Strömberg, 2007. "News Droughts, News Floods, and U.S. Disaster Relief," The Quarterly Journal of Economics, MIT Press, vol. 122(2), pages 693-728, 05.
  11. Abadie, Alberto & Gardeazabal, Javier, 2008. "Terrorism and the world economy," European Economic Review, Elsevier, vol. 52(1), pages 1-27, January.
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