The London Bombings and Racial Prejudice: Evidence from Housing and Labour Markets.

Published on 27 August 2014

On the 7th of July 2005 (henceforth 7/7), four extremist Islamic terrorist bombers targeted London's transport network, killing 52 passengers and injuring hundreds more. Using prerecorded statements, the bombers threatened further acts of terrorism. Indeed, just 2 weeks later, a further four suicide bombers attempted but failed to execute similar attacks.

This paper investigates the impact of the London bombings on attitudes toward ethnic minorities, examining outcomes in housing and labor markets across London boroughs. We use a difference‐in‐differences approach, specifying “treated” boroughs as those with the highest concentration of Asian residents. Our results indicate that house prices in treated boroughs fell by approximately 2% in the 2 years after the bombings relative to other boroughs, with sales declining by almost 6%. Furthermore, we present evidence of a rise in the unemployment rate in treated compared to control boroughs, as well as a rise in racial segregation.