The Impact of Terrorism on the Defence Industry

Published in: Economica, v. 77, no. 307, July 2010, p. 518-543

Posted on RAND.org on January 01, 2010

by Claude Berrebi, Esteban F. Klor

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This paper analyses the impact of terrorism on Israeli companies related to the defence, security or antiterrorism industries, relative to its impact on other companies. We match every Israeli company to the American company with the closest expected return among all the companies that belong to the same industry and trade in the same market, in order to isolate the effect of terrorism from other common industry shocks. The findings show that whereas terrorism had a significant negative impact of 5% on non-defence-related companies, it had a significantly positive overall effect of 7% on defence-related companies

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