| By: |
Graeber, Daniel (DIW Berlin);
Meister, Lorenz (The Institute for New Economic Thinking at the Oxford Martin School (INET Oxford), University of Oxford);
Murray, Neil (DIW Berlin) |
| Abstract: |
Terrorism affects individuals far beyond its immediate victims, with large
economic consequences. We estimate the effect of terrorism on risk preferences
by merging geocoded panel data with the Global Terrorism Database in a
staggered difference-in-differences design comparing those within and beyond
25 kilometers of attacks in Germany. Exposure reduces willingness to take
risks by 2 percent of a standard deviation—localized, peaking after one year,
dissipating within five—implying welfare losses near 106 million Euro
annually. We classify 60, 000 news articles with a fine-tuned language model
and separate two media channels: the salience and the emotional tone of
coverage. Holding attack severity fixed, responses are concentrated among
attacks with more extensive and more negative coverage. The survey data
corroborate media transmission—respondents who do not read newspapers do not
respond—and point to declining happiness as the emotional mechanism. After
severe attacks, self employment falls by 2 percentage points. |
| Keywords: |
Terrorist attacks, risk preferences, staggered difference-in-differences |
| JEL: |
D12 D81 D91 I31 |
| Date: |
2026–09 |
| URL: |
https://d.repec.org/n?u=RePEc:amz:wpaper:2026-27 |