Estimating the peace dividend: The impact of violence on house prices in Northern Ireland

This paper exploits data on the pattern of violence across regions and over time to estimate the impact of the peace process in Northern Ireland on house prices. We begin with a linear model that estimates the average treatment e¤ect of a con‡ict-related killing on house prices –showing a negative correlation between house prices and killings. We then develop an approach based on an economic model where the parameters of the statistical process are estimated for a Markov switching model where con‡ict and peace are treated as a latent state. From this, we are able to construct a measure of the discounted number of killings which is updated in the light of actual killings. This model naturally suggests a heterogeneous e¤ect of killings across space and time which we use to generate estimates of the peace dividend. The economic model suggests a somewhat di¤erent pattern of estimates to the linear model. We also show that there is some evidence of spillover e¤ects of violence in adjacent regions. We are grateful for comments and insights to members of the CIFAR program on Institutions, Organizations and Growth; participants in the CEPR workshop on Con‡icts, Globalization and Development; and seminar participants at Columbia University, the WZB and UAB. Besley also thanks the ESRC and CIFAR for …nancial support.