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The Impact of Terrorism Across Industries: An Empirical Study

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Author Info
Berrebi, Claude
Klor, Esteban F

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Abstract

This paper uses scoring matching techniques and event study analysis to elucidate the impact of terrorism across different economic sectors. Using the Israeli-Palestinian conflict as a case study, we differentiate between Israeli companies that belong to the defence, security or anti-terrorism related industries and other companies. The findings show that whereas terrorism has a significant negative impact on non defence-related companies, the overall effect of terrorism on defence and security-related companies is significantly positive. Similarly, using panel data on countries' defence expenditures and imports from Israel, we find that terror fatalities in Israel have a positive effect on Israeli exports of defence products. These results suggest that the expectation of future high levels of terrorism has important implications for resource allocation across industries.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5360.

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Date of creation: Nov 2005
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Handle: RePEc:cpr:ceprdp:5360

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Related research
Keywords: defense sector; stocks returns; terrorism;

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Find related papers by JEL classification:
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
L64 - Industrial Organization - - Industry Studies: Manufacturing - - - Other Machinery; Business Equipment; Armaments
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    Other versions:
  8. Fishelson, G., 1993. "Political Events and Economic Trends : The Effects of the Intifada on the Israeli Economy," Papers 10-93, Tel Aviv.
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  14. Lieberman, Offer & Ben-Zion, Uri & Hauser, Shmuel, 1999. "A characterization of the price behavior of international dual stocks: an error correction approach," Journal of International Money and Finance, Elsevier, vol. 18(2), pages 289-304, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Karolyi, G. Andrew, 2006. "The Consequences of Terrorism for Financial Markets: What Do We Know?," Working Paper Series 2006-6, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
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