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.
Rockets: The housing market effects of a terrorist threat
Rockets: The housing market effects of a terrorist threat
02/05/2018
Abstract