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Does Harboring Terrorists Have Economic Costs?

  • Claude Berrebi
  • Esteban F. Klor

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.

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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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Paper provided by DIW Berlin, German Institute for Economic Research in its series EUSECON Policy Briefing with number 12.

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Length: 4 p.
Date of creation: 2011
Date of revision:
Handle: RePEc:diw:diwepb:diwepb12
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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.
  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. Gould, Eric D & Klor, Esteban F, 2009. "Does Terrorism Work?," CEPR Discussion Papers 7589, C.E.P.R. Discussion Papers.
  4. Efraim Benmelech & Claude Berrebi & Esteban F. Klor, 2009. "The Economic Cost of Harboring Terrorism," NBER Working Papers 15465, National Bureau of Economic Research, Inc.
  5. Arye Hillman, 2007. "Economic and security consequences of supreme values," Public Choice, Springer, vol. 131(3), pages 259-280, June.
  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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