2018 - Working Papers: Strategy, Innovation and Entrepreneurship

This study analyzes the impact of terrorism on students’ academic achievement. I exploit the temporal and geographical variation in terror attacks in Israel during the Second Intifada, as well as the special structure of the Israeli end-of-high-school exams, which allows observing the same student at multiple exams on different dates. By exploring within student variation in test scores, I provide robust evidence that the occurrence of a fatal terror attack shortly before an exam has a significant adverse effect on students’ exam performances. The effect is transitory and concentrated in the five days preceding the exam. It increases with the number of fatalities and decreases with the physical distance between the student and the attack location. These results indicate that psychological stress is an important mechanism in the effect of terrorism on cognitive performance. Furthermore, I show that even when terrorism only temporarily impairs students’ learning and exam performance, it has a potential lasting effect on human capital accumulation.