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Terrorism is a form of psychological warfare which aims to achieve political goals through the use of violence. We study the effect of Palestinian terrorism on the life satisfaction (happiness) of Israelis during the recent Intifada. The analysis relies on detailed daily data on terrorism and on daily responses to a subjective life satisfaction question recorded in social surveys conducted in Israel in [2002][2003][2004]. Our analysis controls for important determinants of happiness identified in the literature but adds to them daily fatality figures which capture the intensity of terrorism. The main finding of our analysis is that Palestinian terrorism has had practically no effect on the happiness of Israelis. Overall, the level of happiness remained stable throughout the Intifada years despite a large variation in the intensity of terrorism across time and location. The evidence thus casts a doubt on the effectiveness of terrorism in achieving one of its main objectives -demoralizing enemy population.JEL classification codes: H56, I31

This paper investigates how fertility responds to changes in the price of a marginal child and in household income. We construct a large, individual-level panel data set of married Israeli women during the period 1999-2005 that contains fertility histories and detailed controls. We exploit variation in Israel's child subsidy program to identify changes in the price of a marginal child (using changes in the subsidy for a marginal child) and to instrument for household income (using changes in the subsidy for infra-marginal children). We find a significant and positive price effect on fertility: the mean level of marginal child subsidy produces a 7.8 percent increase in fertility. There is a positive effect within all religious and ethnic subgroups, including the ultra-Orthodox Jewish population, whose social and religious norms discourage family planning. There is also a significant price effect on fertility among women who are close to the end of their lifetime fertility, suggesting that at least part of the price effect is due to a reduction in total fertility. As expected, the child subsidy has no effect in the upper range of the income distribution. Finally, consistent with the predictions of Becker (1960) and Becker and Tomes (1976), we find that the income effect is small in magnitude and is negative at low income levels and positive at high levels.

We analyze individual satisfaction with life as a whole and satisfaction with the personal financial situation for Israeli citizens of Jewish and Arab descent. Our data set is the Israeli Social Survey (2006). We are especially interested in the impact of the religions Judaism, Islam and Christianity, where we are able to differentiate between individuals who vary in religiosity between secular and ultra-orthodox. We find a significant effect of religiosity on happiness. With respect to Jewish families it is most striking that the impact of family size on both life and financial satisfaction seems to vary with religiosity. This might be a reason for differentiation in family equivalence scales. For Arab families we did not find this effect. First-generation immigrants are less happy than secondgeneration immigrants, while there is no significant difference between second-generation families and native families. The effect of the Lebanon War is much less than expected.

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