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Does Harboring Terrorists Have Economic Costs?

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  • Claude Berrebi
  • Esteban F. Klor

Abstract

The literature on conflict and terrorism has paid little attention to the economic costs of terrorism for the perpetrators of terror attacks. Our research fills that gap by examining the economic costs of harboring suicide terror attacks. We combine data on Palestinian suicide terrorists with data from the Palestinian Labor Force Survey, to identify and quantify the impact of a successful attack on unemployment and wages. We find robust evidence that terror attacks have important economic costs. They cause a significant increase in unemployment and a significant decrease in wages and on the number of Palestinians working in Israel. Importantly, these effects are persistent and last for at least six months after the attack.

Suggested Citation

  • Claude Berrebi & Esteban F. Klor, 2011. "Does Harboring Terrorists Have Economic Costs?," EUSECON Policy Briefing 12, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwepb:diwepb12
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    File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.391396.de/diw_eusecon_pb0012.pdf
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    References listed on IDEAS

    as
    1. Jaeger, David A. & Klor, Esteban F. & Miaari, Sami H. & Paserman, M. Daniele, 2012. "The struggle for Palestinian hearts and minds: Violence and public opinion in the Second Intifada," Journal of Public Economics, Elsevier, vol. 96(3), pages 354-368.
    2. Benmelech, Efraim & Berrebi, Claude & Klor, Esteban F, 2010. "Economic Conditions and the Quality of Suicide Terrorism," CEPR Discussion Papers 7995, C.E.P.R. Discussion Papers.
    3. Eric D. Gould & Esteban F. Klor, 2010. "Does Terrorism Work?," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1459-1510.
    4. Arye Hillman, 2007. "Economic and security consequences of supreme values," Public Choice, Springer, vol. 131(3), pages 259-280, June.
    5. Efraim Benmelech & Claude Berrebi & Esteban F. Klor, 2010. "The Economic Cost of Harboring Terrorism," Journal of Conflict Resolution, Peace Science Society (International), vol. 54(2), pages 331-353, April.
    6. Efraim Benmelech & Claude Berrebi, 2007. "Human Capital and the Productivity of Suicide Bombers," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 223-238, Summer.
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