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The Economic Cost of Harboring Terrorism

  • Efraim Benmelech

    (Department of Economics, Harvard University, Cambridge, MA, USA, effi_benmelech@harvard.edu)

  • Claude Berrebi

    (RAND Corporation, Santa Monica, CA, USA)

  • Esteban F. Klor

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

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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File URL: http://jcr.sagepub.com/content/54/2/331.abstract
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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
Contact details of provider: Web page: http://pss.la.psu.edu/

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  1. David A. Jaeger & Esteban F. Klor & Sami H. Miaari & M. Daniele Paserman, 2008. "The Struggle for Palestinian Hearts and Minds: Violence and Public Opinion in the Second Intifada," NBER Working Papers 13956, National Bureau of Economic Research, Inc.
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