European Seminars on the Economics of Crime (ESEC)

This study examines how exposure to political violence reshapes market behavior by leveraging Hong Kong’s 2019-2020 protests. Exploiting local variation in tear gas deployment–the primary crowd-control weapon marking sites of violent confrontations–we use a difference-in-differences approach comparing housing prices in buildings within 50 meters of tear gas sites to those 50-1,000 meters away, before the protests and after the National Security Law (NSL) ended the movement. We find that homeowners near violence sites sold their apartments at a significant discount following the NSL, persisting for about six months. The discount varies systematically with properties’ potential sensory exposure to violence, neighborhood political ideology, and residents’ emigration opportunity – patterns inconsistent with local amenity deterioration from tear gas exposure. Our research design isolates the impact of past experiences with violence from expectations of future unrest, underscoring how extreme political experiences can drive high-stakes economic decisions.