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: The literature on conflict and terrorism has paid little attention to the economic costs of terrorism for the perpetrators. This paper* aims to fill that gap by examining the economic costs of committing suicide terror attacks:

Using data covering Palestinian suicide terrorists during the second Palestinian uprising, combined with data from the Palestinian Labour Force Survey, we identify and quantify the impact of a successful attack on unemployment and wages. We find robust evidence that terror attacks have important economic costs. The results suggest that a successful attack causes an increase of 5.3% in unemployment, increases the likelihood that the district’s average wages fall in the quarter following an attack by more than 20%, and reduces the number of Palestinians working in Israel by 6.7% relative to its mean. Importantly, these effects are persistent and last for at least six months after the attack. These findings are important for a variety of reasons. Beyond their direct interpretation they highlight the importance of informing the leaders and the general population of areas harbouring terrorism about the extent of the associated costs. Perhaps this information would help to dissuade terror organisations’ supporters, and strengthen the arguments used by the more moderate voices against terror attacks.