Rockets: The housing market effects of a credible terrorist threat

Yael Elster, Asaf Zussman*, Noam Zussman

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

15 Scopus citations

Abstract

This paper explores the economic costs of conflict using a unique experiment. We analyze the effects of Hezbollah's massive surprise rocket attack against northern Israel during the 2006 Second Lebanon War and the continued threat posed by the organization's expanding rocket arsenal on the housing market, the labor market and patterns of migration flows and sorting. Relying on hedonic and repeat sales approaches and using a difference-in-differences identification strategy for 2000–2012, we show that the attack led to a 6–7% decline in house prices and rents in the most severely hit localities relative to other localities in northern Israel. These effects persisted until 2012, suggesting that the public continued to view the rocket threat as credible. In contrast, we find practically no effect on labor market conditions, migration flows and sorting.

Original languageAmerican English
Pages (from-to)136-147
Number of pages12
JournalJournal of Urban Economics
Volume99
DOIs
StatePublished - 1 May 2017

Bibliographical note

Publisher Copyright:
© 2017 Elsevier Inc.

Keywords

  • Housing market
  • Israel
  • Terrorism

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