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EOPP Discussion Paper
Estimating the Peace Dividend: The Impact of Violence on House Prices in Northern Ireland
Timothy Besley and Hannes Mueller
May 2009
Paper No' EOPP 011:
Full Paper (pdf)

JEL Classification: D74; 016; P16

Tags: peace dividend; northern ireland; conflict; housing price; markov chain

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 effect of a conflictrelated 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 conflict 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 effect of killings across space and time which we use to generate estimates of the peace dividend. The economic model suggests a somewhat different pattern of estimates to the linear model. We also show that there is some evidence of spillover effects of violence in adjacent regions.