This paper investigates how terrorism alters human capital investment through perceived uncertainty. Using various estimators, we identify a causal negative effect of terrorism on Kenyan school enrolment. Among these, we exploit al-Shabaab’s revenue streams and position in the al- Qaeda network to predict attacks. To isolate the significant contribution of behavioural responses to changes in the perceived risk of going to school, we estimate the effect of media reporting about terrorism exploiting house- hold variation in radio signal coverage. Evidence from finely geo-coded data further suggests that attacks occurring some distance from children’s way to school or even on the other side of an international border still decrease school enrolment. Finally, we evaluate risk perception within a structural model, and use it to predict individuals’ earnings loss arising from the reduction in schooling.
Year: 2019 HiCN Working Paper No. 309