The Effect of Terror on Risk Preferences

Graeber, D., Meister L., and Murray, N. (2023). “The Effect of Terror on Risk Attitudes”. (Unpublished Manuscript).

Abstract: Terrorism imposes high economic costs on the affected population. In this paper, we argue that conventional studies on the cost of terrorism lack one important channel: costly behavioural responses. We show that terrorism impacts the risk attitudes of individuals that were in the same region at the time of the attack. Based on a representative sample of the German population, we employ a staggered difference-in-differences (DiD) design that compares individuals living in counties that were affected by a terrorist attack and those that were not. Our results reveal an immediate and significant decline in individuals’ risk propensity following a terrorist attack. Moreover, we find that the emotion of happiness serves as potential mediator in the relationship between exposure to terror attacks and risk attitudes.

The Interaction of Risk Attitudes and Social Preferences

Imre, B. and Murray, N. (2023). “The Interaction of Risk Attitudes and Social Preferences”. (Unpublished Manuscript).