The dislocations of terror: Assessments of risk during the Second Intifada

The goal of terrorism is to create havoc and disrupt the normal functioning of society. To understand the impact of terrorism on a country it is useful to consider two types of country experiences with these shocks to the social order-the instance of a very small number of attacks against high profile targets and the case of chronic terror with a great number of attacks, generally against targets that are part of routine daily activities. The present study explores the Israeli experience with chronic terror. Using expenditure information from coffee shops and restaurants we examine how individuals assess their vulnerability to an attack and adjust their behavior. Specifically, we explore whether distance from the site of an attack, and similarity of a contemplated undertaking to the target of a recent attack, influence decision making in a context of chronic terror. We find strong support for a situational similarity effect but only weak evidence for a proximity effect. We examine the implications of these findings for the organization of economic activity.