Estimating the Peace Dividend: The impact of violence on house prices in Northern Ireland

This paper exploits data on the pattern of violence across regionsand over time to estimate the impact of the peace process in NorthernIreland on house prices. We begin with a linear model that estimatesthe average treatment effect of a conflict-related killing on house prices-showing a negative correlation between house prices and killings. Wethen develop an approach based on an economic model where the para-meters of the statistical process are estimated for a Markov switchingmodel where conflict and peace are treated as a latent state. Fromthis, we are able to construct a measure of the discounted number ofkillings which is updated in the light of actual killings. This modelnaturally suggests a heterogeneous effect of killings across space andtime which we use to generate estimates of the peace dividend. Theeconomic model suggests a somewhat different pattern of estimatesto the linear model. We also show that there is some evidence ofspillover effects of violence in adjacent regions.[...]