Does Terrorism Demoralize? Evidence from Israel

By DMITRI ROMANOVw, ASAF ZUSSMANz and NOAM ZUSSMANww

wIsraeli Central Bureau of Statistics zHebrew University wwBank of Israel

Final version received 30 April 2010.

Terrorism is a form of warfare that is specifically designed to have far-reaching psychological effects

beyond the immediate victims. We study the effect of terrorism on the happiness of Israelis during a recent

period of severe violence with the Palestinians (the second Intifada). The identification strategy is based

on variation in the intensity of terrorism over time and location. Using individual level happiness

equations augmented with daily fatality figures, we show that terrorism had practically no immediate or

delayed effect on the happiness of Jewish Israelis, but adversely affected the happiness of Arab citizens of

Israel.

INTRODUCTION

Terrorism involves the use of violence in order to attain political goals. A key feature ofterrorism is that it is specifically designed to have far-reaching psychological effectsbeyond the immediate victims or objects of the terrorist attacks. Terrorism is thus asophisticated form of psychological warfare that aims to achieve political ends byinfluencing individuals’ emotions and attitudes (Friedland and Merari 1985). In thispaper we focus on Palestinian terrorism during the Intifada that broke out in the autumnof 2000 and claimed the lives of more than a thousand Israelis. This period saw thewidespread use of suicide terrorist attacks. As Hoffman (2006) argues, suicide terrorismwas embraced by Palestinian terrorist organizations as an especially powerfulpsychological weapon in order to demoralize the Israeli population.1

We examine whether Palestinian terrorism achieved this goal by studying the self-reported happiness of Israelis. The analysis relies on detailed data on terrorism and onresponses to a subjective life satisfaction question recorded in comprehensive SocialSurveys conducted in Israel in 2002–04, during the Intifada. We were able to obtain thedate, the time and the location in which each of the survey interviews was conducted.This information provided a link to the daily data on terrorism.

Our analysis controls for important determinants of happiness identified in theliteratureFsuch as gender, age, education and health statusFbut adds to them dailyfatality figures that capture the intensity of terrorism.2 We argue that terrorism can haveboth a direct and an indirect effect on happiness. A potentially important indirect effectcomes about through terrorism-induced deterioration in economic circumstances.3 Byincluding in our regressions variables like income and unemployment status, we controlfor this indirect effect. The focus of our analysis is on the direct effect, which is capturedby the influence of terrorism fatalities on the responses of survey participants to the lifesatisfaction question.

To the best of our knowledge the only other study that estimates the influence ofterrorism on happiness is Frey et al. (2009). The study uses data on terrorism and lifesatisfaction (from the Eurobarometer) for France, the UK and the Republic of Irelandfrom 1973 to 2002. For each country the authors estimate a separate happiness equationthat includes an annual measure of the intensity of terrorism in different regions. Thestudy finds that terrorism strongly depressed happiness. The authors estimate, for

Economica (2010) ]], 1–16

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r The Authors. Economica r 2010 The London School of Economics and Political Science. Published by Blackwell

Publishing, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main St, Malden, MA 02148, USA

example, that for a reduction in terrorist activity to a level that prevails in the morepeaceful parts of the country, a resident of Northern Ireland would be willing to paybetween 26% and 37% of his income.

We believe that our study has several advantages relative to Frey et al. (2009). First,we use high-frequency (daily) data whereas they use low-frequency (annual) data. Theuse of high-frequency data allows us to get a relatively clean estimate of the immediateeffect of terrorist attacks. Second, our data on terrorism are much more detailed. Thisenables us to explore a wide variety of issues, such as how the direction and strength ofthe reaction to terrorism depends on characteristics of the victims, characteristics of thesurvey participants, and the interaction between the two. Third, the intensity of terrorismin France and the UKFand during parts of the period in the Republic of IrelandFwasan order of magnitude less than what Israel experienced during the Intifada. From thenarrow perspective of empirical analysis this gives our study an important advantage.

On the other hand, relative to our study, Frey et al. (2009) have the advantage ofpresenting a long-run perspective. One may argue that the outbreak of the Intifada orsome other relevant episode (e.g. the wave of suicide attacks in early 1996) led to a sharpdecline in happiness and that afterwards additional acts of terrorism had negligibleeffects. We are unable to address this issue directly since the Social Survey data areavailable only from 2002 and there are no other reliable sources for life satisfaction data.

Our analysis is related to a line of research in psychology and psychiatry. Severalstudies have examined the effect of the terrorist attacks of 11 September 2001 in the USAon symptoms of post-traumatic stress disorder (PTSD). Based on a survey conductedthree to five days after the attacks, Schuster et al. (2001) report that Americans across thecountry had substantial symptoms of stress. In contrast, based on a survey conductedone to two months after the attacks, Schlenger et al. (2002) report that the overallpsychological distress levels in the USA were within normal ranges. The same studyreports, however, that the prevalence of PTSD in the New York City metropolitan areawas substantially higher than elsewhere in the country. Galea et al. (2002) and CohenSilver et al. (2002) also find that levels of PTSD were positively correlated with theseverity of exposure to the attacks.

More relevant to our analysis are the studies that focus on the psychological effect ofPalestinian terrorism on Israelis. Based on a survey conducted in April and May of 2002,at the height of the Intifada, Bleich et al. (2003) conclude that the psychological impactseems to be moderate. They also report that the level of exposure to terrorism was notassociated with the incidence of PTSD. In a follow-up study based on a survey conductedin May 2004, during a relatively calm period, Bleich et al. (2006) report similar rates ofPTSD as in the 2002 survey. Using data from a survey conducted from June to August of2001, Shalev et al. (2006) compared rates of PTSD in residents of two suburbs ofJerusalem, with one suburb being more directly affected by terrorism than the other. Thestudy reports that the two groups showed comparable levels of PTSD.

The studies mentioned above are relevant to our analysis since mental health hasbeen found to be strongly correlated with happiness.4 At the same time we believe thatour study has several advantages relative to the literature in psychology and psychiatry.First, and most importantly, the studies mentioned above are based on surveys thatexplicitly focus on the psychological effect of terrorism. This may bias the results to theextent that people are prompted to think about the subject. In contrast, the lifesatisfaction data that we use were obtained from Social Surveys that do not mention theword terrorism. The connection between terrorism and subjective assessment ofwellbeing was established only by us. Second, the surveys that we use contain a very

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large number of observations: we have around 22,000 while the typical study inpsychology has less than 1000. Our survey is also richer in terms of the number ofrespondent characteristics that may be used as controls in the analysis. Third, unlike thestudies in psychology that paint a picture at a given point in time, our analysis relies on acontinuous (daily) measurement of the outcome variable.

We begin our empirical analysis by demonstrating that at the annual and monthlyfrequencies the intensity of terrorism was not negatively correlated with the overallhappiness of Israelis. We also demonstrate that differences in exposure to terrorismacross cities in Israel were not negatively correlated with city-wide levels of happiness.Using Eurobarometer data, we demonstrate that during the three years examined,Israelis were not particularly unsatisfied with their lives when compared to citizens ofother, mostly terrorism-free, countries.

Our main set of results is derived from estimating individual level happinessequations augmented with daily data on terrorism fatalities. We show that the number ofcountry-wide terrorism fatalities has no direct same-day effect on the life satisfaction ofJewish Israelis. Moreover, we do not find much evidence of a delayed reaction either. Incontrast, we find that Arab citizens of Israel (Arab-Israelis) display a robust negativereaction to terrorism fatalities. We argue that the negative reaction of Arabs may berelated to increasing concerns of discrimination against them. In further analyses wedemonstrate that the lack of reaction of life satisfaction to terrorism among Jews is notdue to habituation during the period examined; that Jewish Israelis display a negativesame-day reaction to civilian fatalities when the terrorist attack takes place in the surveyrespondent’s own city; and that Arab-Israelis react negatively to civilian fatalities but notto security force fatalities. At the end of the results section we focus on a potential pitfallin the analysis and offer possible explanations for our ‘non-result’.

We believe that our study makes two important contributions, one methodo-logical and the other substantive. The methodological contribution is in the applicationof an event-study style approach to the study of happiness. Kimball and Willis(2006) argue that happiness has two components: elation (short-run happiness)and baseline mood (long-run happiness). They further argue that event studies usinghigh-frequency data enable identification of the two components and provideinformation about preferences and expectations. Using daily survey dataFaggregatedto weekly observationsFKimball et al. (2006) examine the influence of HurricaneKatrina (which struck New Orleans and the surrounding areas in August 2005) on thehappiness of Americans. They find that the response of happiness was especially strong inthe South Central region, closest to the devastation of Katrina. The dip in happinesslasted two or three weeks in that region and one or two weeks in the rest of the country.Methodologically, the major difference between that study and ours is the repeatednature of the exogenous shock examined in our case. We demonstrate that one canfruitfully use detailed high-frequency data on life satisfaction to study the effects ofrecurring unpredicted exogenous events.5

The substantive contribution of our study lies in the examination of a previouslyunder-studied but very important question of the effect of terrorism on morale. Theevidence that we present in this study casts doubt on the effectiveness of terrorism inachieving one of its objectivesFdemoralizing enemy population.

The rest of the study is organized as follows. The next section describes the data andthe econometric methodology employed. In Section II we present the evidence on theeffect of terrorism on happiness, provide methodological defence of the analysis, andoffer possible interpretations of the results. The final section summarizes the results.

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I. DATA AND METHODOLOGY

Life satisfaction and terrorism data

In 2002 Israel’s Central Bureau of Statistics conducted its first Social Survey, whichcovered a representative sample of roughly 7000 individuals aged 20 and older. Thesurvey contained dozens of questions about the sociodemographic and economiccharacteristics of each individual’s household. Since 2002 the survey has been repeatedannually, each time with a different set of individuals. For our purposes the most relevantquestion in the survey is the one in which the surveyed individual is asked: ‘Overall, areyou satisfied with your life?’ There are four possible answers to this question: ‘verysatisfied’, ‘fairly satisfied’, ‘not very satisfied’ and ‘not at all satisfied’. The structure of thequestion and the possible answers is identical to those contained in other surveys of thistype, such as the Eurobarometer. Our data are from the surveys of 2002, 2003 and 2004,which together covered around 22,000 individuals. The surveys are administered inperson (at the respondent’s place of residence) by employees of the Israeli Central Bureauof Statistics. They are typically conducted during weekdays in the afternoon hours. Wewere able to obtain the date, the time and the location in which each of the surveys wasconducted. This information provides a link to our data on terrorism.

The data on terrorism cover the same period as the Social Surveys and combineinformation from several sources: B’Tselem (the Israeli Information Centre for HumanRights in the Occupied Territories), the Israeli Ministry of Foreign Affairs, the IsraeliMinistry of Defence and the Israeli National Insurance Institute. Terrorism dataobtained from these sources were cross-checked and augmented using media reportsobtained via the LexisNexis service. This allows us to assign to each terrorism attack adate and a time. In order to link this data to the surveys we used a cut-off rule: if theattack occurred after the survey was administered, it would be assigned to the next surveydate. The data on terrorism cover all politically motivated and fatal attacks inside Israeland in the Occupied Territories (Judea, Samaria and the Gaza Strip). They includeattacks against both civilians and security forces. In each case we have information aboutthe number of fatalities, location and other relevant variables.

It is important to note that our ability to analyse life satisfaction on a daily basis restson two features of the Israeli Social Survey: (1) the number of individuals surveyed isrelatively large; (2) the survey is conducted throughout the year. To gain perspective it isuseful to compare the Israeli Social Survey to the Eurobarometer. In 2004, for example,the relevant European population (individuals aged 15 and older in EU-15 countries) was304 million. Of them, about 15,000 were surveyed for the Eurobarometer. In the sameyear, 7616 Israelis were surveyed out of a population (individuals aged 20 and older) ofabout 4.2 million. Thus the Eurobarometer had 5 surveys per 100,000 population whilethe Israeli Social Survey had 180. Moreover, the Eurobarometer survey is conducted onlyonce or twice a year, and in each case lasts for only one month. In contrast, the Israelisurvey is conducted throughout the year, with an average of 23 interviews per day.

Econometric methodology

The four possible responses to the Social Survey question on life satisfaction can beordered in a natural way: a person who is ‘very satisfied’ is more satisfied than a personwho is just ‘fairly satisfied’, and so on. This implies that a natural way to econometricallyanalyse the determinants of life satisfaction is to use discrete choice models of ordereddata, such as ordered logit. This is also the main approach we take. However, we also

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demonstrate that the same qualitative results are obtained by dividing the four possibleresponses to the life satisfaction question into two categoriesFsatisfied (pulling together‘very satisfied’ and ‘fairly satisfied’) and unsatisfied (pulling together ‘not very satisfied’and ‘not at all satisfied’)Fand using logit instead of ordered logit.6

II. DOES TERRORISM DEMORALIZE? THE EVIDENCE

The big picture

During 2002–04 there were 785 terrorism fatalities in Israel, two thirds of them civilian(see Table 1).7 Over time, the terrorist threat diminished: the total number of fatalitiesdropped by half from 2002 to 2003, and again by half from 2003 to 2004. Although theterrorist threat declined over time, happiness remained stable (see Table 2): the share ofsatisfied individuals (the sum of the top two rows) was 82.9% in 2002, 81.7% in 2003,and 82.4% in 2004.

Figure 1A demonstrates that while there was significant month-to-month variation inthe terrorism death toll during 2002–04, satisfaction with life was relatively stable ataround 82%. Casual inspection of Figure 1B strengthens the impression that the intensityof terrorism and life satisfaction were uncorrelated. Especially noteworthy is the fact thatduring the month with the largest number of fatalities (March 2002), the overall level oflife satisfaction was higher than average.8

In Table 3 we compare the life satisfaction of Israelis to that of residents of the EU-15countries. We find that residents of Scandinavian countries are very much satisfied withtheir lives, while residents of southern European countries are much less satisfied. Bothresults are well-documented in the literature.9 In 2002, the year with the highest numberof terrorism fatalities, the satisfaction of Israelis with their lives was higher than the

TABLE 1

TERRORISM FATALITIES IN ISRAEL, 2002–04

2002 2003 2004

Civilians 297 156 74

Security forces 159 57 42

Total 456 213 116

Source: Based on a dataset compiled by the authors as described in the text.

TABLE 2

LIFE SATISFACTION IN ISRAEL, 2002–04 (DISTRIBUTION OF RESPONSES IN %)

2002 2003 2004

Very satisfied 26.6 27.2 28.0

Fairly satisfied 56.3 54.5 54.4

Not very satisfied 13.8 14.2 13.6

Not at all satisfied 3.3 4.1 4.0

Observations 6938 7189 7581

Source: Authors’ calculations based on Israeli Social Surveys.

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average of the EU-15 countries. In that year Israel was ranked 9th in this group of 16countries. Interestingly, as the number of terrorism fatalities in Israel decreased, the relativeranking of the country in terms of life satisfaction actually dropped slightly. Overall, Table 3suggests that during the period examined residents of Israel were not particularly unhappywhen compared to residents of the relatively terrorism-free EU-15 countries.10

Is it the case that residents of Israeli cities that were subjected more intensely toterrorism were less satisfied with their lives? We explore this issue in Figure 2, which plotsaggregate life satisfaction against terrorism intensity in Israel’s eight largest cities.11

Figure 2 seems to suggest a positive correlation between the two variables. It is especiallystriking that in Jerusalem, the city that suffered most from terrorism, satisfaction with

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(a)

(b)

FIGURE 1. Terrorism fatalities and life satisfaction in Israel, January 2002 to December 2004.

Sources: Life satisfaction data are from the Israeli Social Surveys, 2002–04; terrorism fatalities data are from

a database constructed by the authors as described in the text.

Notes: Life satisfaction data are for both Jewish and Arab residents of Israel.

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life is the highest. One should not draw the conclusion that a particularly high level ofterrorism made Jerusalem a happy place, however, since a large share of Jerusalem’sJewish residents are highly religious, and religiosity is positively and strongly associatedwith life satisfaction (as we show in the next section). Thus controlling for a large set ofpotentially confounding factors is crucial for better identifying the relationship betweenterrorism and happiness. We turn to such a microeconometric examination next.

A closer look

Table 4 displays the results of our baseline life satisfaction equations. The set of baselineregressors that we use is relatively standard in the happiness literature. The ordered logitresults for Jewish Israelis reported in column 1 show that (all else being equal) males aremore satisfied with their lives than females, and that the effect of age on life satisfactionhas the well-documented U-shape. Married individuals are happier than the non-married. Life satisfaction rises with the number of children one has, with level ofeducation and with religiosity. Poor health is negatively associated with life satisfaction,as is being an immigrant.

Per capita family income is positively related to satisfaction with life. Conversely, beingunemployed has a negative association with life satisfaction. By including these two variablesin the equation, we control for what was termed in the Introduction the ‘indirect effect of

TABLE 3

LIFE SATISFACTION IN COMPARATIVE PERSPECTIVE: ISRAEL VERSUS THE EU-15 COUNTRIES

2002 2003 2004

1 Denmark 97 96 97

2 Sweden 92 93 96

3 Luxembourg 95 87 95

4 Finland 91 91 94

5 The Netherlands 92 91 92

6 Ireland 87 85 93

7 United Kingdom 86 88 90

8 Belgium 81 83 91

9 Austria 83 82 85

10 Spain 80 83 86

11 France 78 76 82

12 Germany 78 73 84

13 Italy 80 76 76

14 Greece 58 63 66

15 Portugal 59 56 59

EU-15 82 81 85

Israel 83 82 82

NotesThe columns show for each country and year the share (in %) of respondents indicating that they are ‘verysatisfied’ or ‘fairly satisfied’ with their life; the EU-15 countries are listed in descending order of the averageshare of satisfied respondents across the three years.Source: Authors’ calculations based on Eurobarometer surveys (58, 60 and 62) and Israeli Social Surveys.

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terrorism’: the possibility that an individual suffered an adverse economic shock because ofthe Intifada.

The ordered logit results for Arab-Israelis, presented in column 2 of Table 4, arequalitatively quite similar to those obtained for Jews. The main interesting exception isthe finding that Arab females are more satisfied with their lives than Arab males. Table 4suggests that the method of estimation does not matter: the logit results in columns 3 and4 are qualitatively identical to those obtained using ordered logit.

The main set of individual level results on the effect of terrorism on life satisfactionis presented in Table 5. They are based on ordered logit regressions that include all theexplanatory variables from Table 4 but add to them daily measures of terrorismintensity in order to estimate terrorism’s direct effect.12 In column 1 of Table 5,terrorism intensity is captured by the daily country-wide total number of fatalities. Thecoefficient for this variable is negative but insignificant. In column 2 we examinewhether the reaction of life satisfaction to terrorism is non-linear by including in theregression the number of fatalities and the number of fatalities squared. The coefficientsfor both variables are insignificant. In column 3 we further explore the issue of non-linearity by including in the regression the daily number of major terrorist attacks,where such attacks are defined as those that resulted in at least five fatalities. Thecoefficient of this variable is negative but insignificant. Overall, the evidence presentedin columns 1 to 3 suggests that terrorism has had no same-day direct effect on the lifesatisfaction of Jewish residents of Israel.

In contrast, columns 4 to 6 of Table 5 provide evidence that terrorism has had anegative and statistically significant same-day direct effect on the life satisfaction ofArab-Israelis. Why do Arabs display a stronger negative reaction to terrorism than Jews,despite the fact that they are in general not the target of the attacks? Arab-Israelis have

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Petah Tiqwa

Ashdod

Be'er Sheva

Tel AvivNetanya

Haifa

FIGURE 2. Terrorism intensity and life satisfaction in Israel’s eight major cities, 2002–04.

Sources: Life satisfaction data are from the Israeli Social Surveys, 2002–04; terrorism fatalities data are from

a database constructed by the authors as described in the text; population data are from the Statistical Abstract of

Israel, 2003, Table 2.14.

Notes: Life satisfaction data are for non-Arab survey respondents.

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long seen themselves as a discriminated against minority. The outbreak of the Intifada inSeptember 2000 was followed by severe clashes between the Israeli police and Arab-Israelis. Since then tensions between Jews and Arabs in the country have grown.13 It isthus possible that the effect that we capture in Table 5 reflects the fear of Arab-Israelisthat the intensification of terrorism may lead to increased discrimination against them.14

An alternative possible explanation for this finding is that Arab-Israelis, who are part ofthe Palestinian people, are concerned that the terrorist attacks may trigger an Israeli

TABLE 4

BASELINE LIFE SATISFACTION EQUATIONS

Ordered logit Logit

Jews Arabs Jews Arabs

1 2 3 4

Male 0.071nn � 0.274nnn 0.078n � 0.328nnn

(0.031) (0.085) (0.043) (0.099)

Age � 0.113nnn � 0.062nnn � 0.109nnn � 0.071nnn

(0.006) (0.017) (0.008) (0.022)

Age squared 0.001nnn 0.001nnn 0.001nnn 0.001nnn

(0.000) (0.000) (0.000) (0.000)

Married 0.706nnn 0.560nnn 0.832nnn 0.515nnn

(0.039) (0.106) (0.050) (0.130)

Number of children 0.074nnn � 0.017 0.082nnn 0.012

(0.013) (0.025) (0.021) (0.027)

Post-secondary education 0.079n � 0.030 0.173nnn 0.112

(0.042) (0.146) (0.059) (0.193)

Academic education 0.158nnn 0.160 0.421nnn 0.745nnn

(0.039) (0.139) (0.061) (0.258)

Poor health � 0.664nnn � 1.032nnn � 0.812nnn � 1.089nnn

(0.036) (0.107) (0.047) (0.112)

Religious 0.224nnn � 0.010 0.273nnn 0.232nn

(0.040) (0.091) (0.056) (0.107)

Very religious 1.253nnn 0.510nnn 1.492nnn 0.594nnn

(0.073) (0.151) (0.170) (0.182)

Immigrant � 0.783nnn � 0.665nnn

(0.040) (0.052)

Per capita family income 0.083nnn 0.159nnn 0.133nnn 0.356nnn

(0.006) (0.036) (0.011) (0.064)

Unemployed � 0.591nnn � 0.606nnn � 0.615nnn � 0.454nn

(0.068) (0.144) (0.076) (0.201)

Observations 18,007 2724 18,007 2724

NotesDependent variable is reported life satisfaction; the regressions include a set of year and month dummies;standard errors, clustered by date, are in parentheses.n,nn,nnnRepresent statistical significance at the 10%, 5% and 1% levels.Regressions 1 and 2 estimated by ordered logit (cut-off values not reported); regressions 3 and 4 estimated bylogit and include an intercept (not reported).Immigrants are defined as foreign born individuals who moved to Israel since 1989. (This variable was excludedfrom columns 2 and 4 since there are no Arab immigrants.)Source: Authors’ calculations based on Israeli Social Surveys.

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military response, potentially exacting a heavy toll from Palestinians living in theOccupied Territories.

In Table 6 we explore the possibility that the reaction to terrorism may be delayed. Wedo so by including in the life satisfaction regression the cumulative number of fatalitieswithin windows of increasing length: from the same day and up to two weeks. For Jews wefind that all the relevant coefficients are statistically insignificant. In contrast, for Arabs wefind a statistically significant negative effect that lasts up to a week.

One may argue that over time, as people gain experience dealing with terrorism, anattack of a given magnitude would yield a more muted reaction. We test this hypothesisby including in the analysis interactions between the daily number of fatalities anddummy variables for the years 2003 and 2004 (Table 7). The evidence does not seem toprovide support for the habituation hypothesis (at least not for the 2002–04 period), asall the interaction coefficients are insignificant.

In Table 8 we differentiate between security forces and civilian fatalities, and for thecivilian fatalities between those that occurred in the survey respondent’s own city inIsrael, in other cities in Israel, and in the Occupied Territories.15 For Jews, thecoefficients for both security forces and civilian fatalities are negative; both, however, areinsignificant. When we further break down the civilian fatalities, we find that the same-day reaction to civilian fatalities in one’s own city is negative and marginally significant.The fact that individuals respond most strongly to fatalities in their own city makesintuitive sense and fits well with findings in the psychological literature. Anotherinteresting finding reported in Table 8 is that the negative life satisfaction reaction ofArabs to terrorism is restricted to civilian fatalities. This result may be related to ourearlier discussion of discrimination and to the fact that most civilian fatalities were due toattacks in (predominantly) Jewish cities in Israel proper, while most security forcesfatalities were due to attacks in the Occupied Territories. Arab-Israelis, who regularlywork and shop in Jewish cities in Israel, may expect to be treated with more suspicionand hostility following attacks (against civilian targets) in these cities than followingattacks (against security forces targets) in the Occupied Territories.

TABLE 5

EFFECT OF TERRORISM ON LIFE SATISFACTION

Jews Arabs

1 2 3 4 5 6

Fatalities � 0.005 � 0.013 � 0.036nn � 0.124nn

(0.007) (0.020) (0.017) (0.061)

Fatalities squared 0.001 0.006

(0.001) (0.004)

Major attacks � 0.037 � 0.545nn

(0.090) (0.231)

Baseline regressors Yes Yes Yes Yes Yes Yes

Observations 18,007 18,007 18,007 2724 2724 2724

NotesDependent variable is reported life satisfaction; standard errors, clustered by date, are in parentheses.nnRepresents statistical significance at the 5% level.Estimated by ordered logit; baseline regressors are from Table 4.Source: Authors’ calculations based on Israeli Social Surveys.

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TABLE6

ISTHEEFFECT

OFTERRORISM

ONLIF

ESATISFACTIO

ND

ELAYED?EFFECT

OF

THEC

UMULATIV

EN

UMBER

OFFATALIT

IESU

SIN

GIN

CREASIN

GW

INDOW

LENGTHS

Window

length

Jews

Arabs

12

34

56

78

Sameday

�0.005

�0.036nn

(0.007)

(0.017)

Halfaweek

0.000

�0.039nnn

(0.005)

(0.013)

Oneweek

�0.003

�0.039nnn

(0.005)

(0.012)

Twoweeks

�0.004

�0.009

(0.005)

(0.012)

Baselineregressors

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Observations

18,007

18,007

18,007

18,007

2724

2724

2724

2724

Notes

Dependentvariable

isreported

life

satisfaction;thewindow

lengthsofhalfaweek,oneweekandtw

oweeksincludethedayoftheeventandthenext3,6and13days,

respectively;standard

errors,clustered

bydate,are

inparentheses.

nn, nnnRepresentstatisticalsignificance

atthe5%

and1%

levels.

Estim

atedbyordered

logit;baselineregressors

are

from

Table

4.

Source:

Authors’calculationsbasedonIsraeliSocialSurveys.

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Why does not terrorism affect life satisfaction?

In this subsection we first demonstrate that our analysis is robust to a potential criticismand then discuss alternative explanations for our ‘non-result’: that Palestinian terrorismduring the Intifada did not demoralize Israelis.

TABLE 7

IS THERE HABITUATION TO TERRORISM

Jews Arabs

1 2 3 4

Fatalities � 0.005 � 0.003 � 0.036nn � 0.028

(0.007) (0.010) (0.017) (0.026)

Fatalitiesn2003 dummy � 0.011 0.005

(0.017) (0.039)

Fatalitiesn2004 dummy 0.003 � 0.043

(0.019) (0.049)

Baseline regressors Yes Yes Yes Yes

Observations 18,007 18,007 2724 2724

NotesDependent variable is reported life satisfaction; standard errors, clustered by date, are in parentheses.nnRepresents statistical significance at the 5% level.Estimated by ordered logit; baseline regressors are from Table 4.Source: Authors’ calculations based on Israeli Social Surveys.

TABLE 8

INFLUENCE OF VICTIM CHARACTERISTICS

Jews Arabs

1 2 3 4 5

Fatalities � 0.005 � 0.036nn

(0.007) (0.017)

Security forces fatalities � 0.014 � 0.015 � 0.007

(0.015) (0.015) (0.054)

Civilian fatalities � 0.002 � 0.041nn

(0.009) (0.020)

in own city in Israel � 0.063n

(0.036)

in other cities in Israel 0.002

(0.010)

in Occupied Territories 0.007

(0.029)

Baseline regressors Yes Yes Yes Yes Yes

Observations 18,007 18,007 18,007 2724 2724

NotesDependent variable is reported life satisfaction; standard errors, clustered by date, are in parentheses.n,nnRepresent statistical significance at the 10% and 5% levels.Estimated by ordered logit; baseline regressors are from Table 4.Source: Authors’ calculations based on Israeli Social Surveys.

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In the Introduction we argued, based on the existing literature, that subjectivemeasures of wellbeing (such as life satisfaction and happiness) are closely related tomeasures of mental health. The existence of such a relationship underlies our analysis.Here we provide additional, independent evidence that the two concepts are indeedrelated. We do so by utilizing data from the Israeli Health Survey. The survey wasinitiated by the Israeli Ministry of Health as part of the International Mental HealthSurvey of the World Health Organization. The survey was conducted from May 2003 toMay 2004 by the Central Bureau of Statistics and covered a representative sample ofroughly 4800 individuals aged 21 and older.

Survey participants were asked, among other things, to provide subjective assessments oftheir happiness and overall mental health.16 The correlation between the two variables at theindividual respondent level is high (0.53) and statistically significant at the 1% level. TheHealth Survey also contains questions on mental health symptoms such as stress, depression,and sleeplessness. All are significantly correlated with happiness. Our analysis finds thatnone of these subjective assessments of happiness, overall mental health and mental healthsymptoms is correlated with variations over time in the intensity of terrorism.17

Assuming that our results are robust to the concern raised above, how could we accountfor the study’s main finding: that terrorism has had a negligible effect on the happiness ofIsraelis? We discuss two possible explanations. The first has to do with government action tocurb terrorism. We argue that public morale may depend on the perceived stance andcompetence of the government in combating terrorism. If the government is perceived to beactive and its counterterrorism measures are perceived as effective, the public may be lessaffected by terrorism. During the Intifada, and especially since the spring of 2002, Israel’scounterterrorism strategy proved successful in curbing Palestinian terrorism (see Table 1 andFigure 1A). This may help to explain why the Israeli public did not become demoralized.

An alternative possible explanation for the paper’s main finding has to do with theconcept of resiliency, which refers to the ability to recover from or adjust easily to difficultcircumstances. Two recent studies, Friedland et al. (2005) and Elran (2006), have attemptedto define, measure and explain ‘social resiliency’ in the Israeli context. The basic messageemanating from these studies is that Israelis have managed to adjust well to terrorism, evenprior to the outbreak of the second Intifada, by employing various adaptation mechanisms.The focus of these studies is on (relatively minor) behavioural changes, such as keepingaway from places where terrorists are most likely to strike (e.g. public buses).18 Thisadaptation reflects the fact that terrorism has become for Israelis part of ‘normal’ everydaylife. Although our analysis focused on the psychological reaction to terrorism, rather thanon changes in behaviour, it conveys the same message: terrorism has become expected andtherefore the reaction to it is muted. The results of our study can thus be seen ascomplementing previous findings in painting a picture of resiliency.

The results that we found in the Israeli case may apply more generally. Krueger(2007), who reviews the literature on the psychological impact of terrorism, reaches theconclusion that this impact is likely not very large. To support this conclusion, heobtained and analysed data from an experience sampling study from the USA thatstarted the week before 9/11. In experience sampling studies, individuals carry arounddigital devices which beep at random or at regular intervals and ask the participants toreport how they feel at that moment. The data show that on 9/11, there was a large jumpin reported sadness. Yet within four days after 9/11, reported sadness appears to havereturned to the baseline level. This surprising result (given the magnitude of the event), aswell as some of the other results mentioned in the Introduction of this paper, seem to fitwell with our findings for Israel.

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III. CONCLUSION

Using detailed daily data on terrorism and life satisfaction, we studied the effect ofPalestinian terrorism on the morale of Israelis during the recent Intifada. Our mainconclusion is that terrorism has had a very limited effect on the happiness of Israelis. Theeconometric analysis showed that the number of country-wide terrorism fatalities had nodirect same-day effect on the life satisfaction of Jewish Israelis and that there was notmuch of a delayed effect either. On the other hand, the life satisfaction of Arab citizens ofIsrael displayed a robust negative reaction to terrorism fatalities. We argued that thenegative reaction of Arabs may be related to increasing concerns of discriminationagainst them. Using an independent data source, we demonstrated that mental health,like life satisfaction, was not influenced by terrorism.

Our analysis makes a methodological contribution to the study of happiness. Wedemonstrated that one can fruitfully use detailed high-frequency data on life satisfaction tostudy the effects of recurring unpredicted exogenous events. The substantive contribution ofthe analysis lies in the examination of a previously under-studied but very important questionof the effect of terrorism on life satisfaction. The evidence we presented casts doubt on theeffectiveness of terrorism in achieving one of its objectivesFdemoralizing enemy population.

ACKNOWLEDGMENTS

We are indebted to the editor, Peter Norman Sorensen, two anonymous referees, Daniel Benjamin,Ori Heffetz, Alan Krueger, Shlomo Yitzhaki and participants of seminars at Cornell Universityand the Hebrew University for useful comments and advice. Aleksander Vainer provided excellentresearch assistance.

NOTES

1. It is important to note that in this study we include under the heading ‘terrorism’ attacks that resulted inboth civilian and security forces fatalities, despite the fact that most definitions classify only attacksagainst civilians as ‘terrorism’. We take this approach solely for the sake of brevity.

2. Recent updates on the state of happiness literature can be found in Di Tella and MacCulloch (2006),Frey (2008) and Kahneman and Krueger (2006).

3. Previous research has estimated that the cumulative GDP loss in Israel due to the Intifada was in theregion of 10%. See, for example, Eckstein and Tsiddon (2004) and Zussman and Zussman (2006).

4. See, for example, Layard (2005). In Section II below we provide independent evidence on therelationship between happiness and mental health.

5. A similar approach to ours was taken recently by Levinson (2009), who matched data from the GeneralSocial Survey with daily data on air quality in the USA and showed that people interviewed on dayswhen air pollution was worse than the local seasonal average report lower levels of happiness.

6. The results are also robust to the use of ordered probit and probit. In all cases the estimation takesaccount of sampling weights.

7. According to B’Tselem data, during the same period 2441 Palestinians were killed by Israeli securityforces and civilians.

8. Using monthly data, an OLS regression of life satisfaction on the number of fatalities yields aninsignificant coefficient.

9. See, for example, Blanchflower and Oswald (2008).10. It is interesting to note that the major terrorist attack in Madrid on 11 March 2004 did not lower the life

satisfaction of Spaniards. In fact, the share of satisfied individuals in Spain rose from 83% to 86%between 2003 and 2004.

11. City size and the level of life satisfaction both refer to the non-Arab population.12. The coefficients on the baseline variables proved robust to changes in the regression specification,

therefore in all the tables below, we focus only on the variables of interest.13. See Smooha (2004) for a recent analysis of Arab–Jewish relations in Israel.14. Our results are in line with findings in the psychological literature: based on a survey conducted in Israel

in September 2003, Hobfoll et al. (2006) report that Arabs had significantly higher levels of PTSD thanJews; a similar finding is reported by Bleich et al. (2006). Miaari et al. (2008) argue that the outbreak ofthe Intifada increased discrimination against Arab citizens in the Israeli labour market. Results along

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these lines have been reported by Aslund and Rooth (2005) for Sweden, and Davila and Mora (2005)and Kaushal et al. (2007) for the USA.

15. For Arab-Israelis we cannot further break down the civilian fatalities. This is due to the fact that Israelicities are highly segregated and terrorist attacks target (predominantly) Jewish cities. Thus we simply donot have enough observations of Arab-Israelis reacting to attacks in their own cities.

16. The happiness question in the Health Survey asks: ‘In the last 30 days, how often did you feel happy?’The four possible answers to this question were ‘never’, ‘rarely’, ‘every once in a while’ and ‘often’. Theoverall mental health question asks: ‘Overall, how would you rate your mental health?’ The five possibleanswers were ‘definitely not good’, ‘not so good’, ‘good’, ‘very good’ and ‘excellent’.

17. The analysis excludes May 2003 and May 2004, the two months with the lowest number of observations.(For May 2003 we have 47 observations, or 1% of the total; for May 2004 we have 25 observations, or0.5% of the total.) Note that the data that we obtained identify only the month but not the date wheneach survey was conducted. This implies that it is impossible to replicate the microeconometric analysisthat we conducted using daily life satisfaction data.

18. See Becker and Rubinstein (2004) for an analysis of the effect of terrorist attacks on the demand for busservices in Israel.

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