From the Abstract:
Terrorist attacks influence economic growth and individual psychology. However, identifying the direct effect of terrorism on economics and psychology is difficult because institutions also change in response to terrorist attacks. This paper controls for institutional responses to terrorist attacks by studying people who live beyond the institutions' borders, but are exposed to the attacks. I find that terrorism leads to declines in trust, subjective well-being, and the importance of creativity and freedom. However, at the macro-level, terrorism leads to increases in economic output and household income. These results are consistent with a growing literature that finds counterintuitive responses to trauma.In World Wars I and II the received wisdom of military strategists was that mass air war including on civilian populations and unrestricted submarine warfare on all shipping would impose not only production and logistical damage on the enemy nation but would lead to a reduction in civilian morale and willingness to support the war effort.
The real world response was much as described here: "at the macro-level, [military] terrorism leads to increases in economic output and household income."