Terrorism, Education, and the Role of Expectations: Evidence from al-Shabaab Attacks in Kenya

This paper explores how terrorism alters human capital investment by affecting expectations. Using different estimators, we identify a negative causal effect of terrorism on Kenyan primary school enrolment and attendance. 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 indirect mechanisms - like expectations - we use finely geo-coded data on children and their closest schools as well as border discontinuities in educational provision, combined with media and attitudinal data. Moreover, we evaluate the degree and effect of the discrepancy between objective and subjective expectations in a structural model.