Discussion paper

DP5360 The Impact of Terrorism Across Industries: An Empirical Study

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.


Klor, E and C Berrebi (2005), ‘DP5360 The Impact of Terrorism Across Industries: An Empirical Study‘, CEPR Discussion Paper No. 5360. CEPR Press, Paris & London. https://cepr.org/publications/dp5360