The Cost Of Terror: Effects Of The Second Palestinian Intifada On Jerusalem House Prices

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Executive Summary

This research presents new findings on the economic cost of terror. To that end, the authors provide evidence of changes in house prices in the Gilo neighborhood of Jerusalem in the wake of the 2000 Second Palestinian Intifada. During that period, Gilo suffered from sporadic and ongoing gunfire from the neighboring Palestinian village of Beit Jala. The sample includes 555 housing transactions from the Gilo neighborhood of Jerusalem over the 1997-2008 period. Results of VAR estimation indicate that shooting events result in a lagged 9.8 percent reduction in Gilo house values. However, as evidenced in the impulse response functions, those effects are largely reversed within 18 months of the terror event.

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