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Household Economic Decisions under the Shadow of Terrorism

  • Dimitris Christelis

    ()

    (Department of Economics, University Of Venice Cà Foscari)

  • Dimitris Georgarakos

    ()

    (Department of Money and Macroeconomics, Goethe University Frankfurt)

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 the car) or psychologically (spending on personal care products by females in couples).

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Paper provided by Department of Economics, University of Venice "Ca' Foscari" in its series Working Papers with number 2010_16.

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Length: 36
Date of creation: 2010
Date of revision:
Handle: RePEc:ven:wpaper:2010_16
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