Terrorism cause psychological injury, placing an unsettling impact on human life. In Pakistan, the continuous stream of terrorism since 2009 induced fear, expectedly influencing households’ behaviour about their economic decisions. In this context, the study empirically investigates the effects of terrorism on households’ time allocation decisions in the pre-2009 and post-2009 periods to track their time allocation for business activities and leisure. For this study, 200 households are interviewed from district Peshawar of the KPK province in Pakistan, one of the worst-hit districts from terrorism.

Findings of the study reveal that in general, terrorism has posed a significant impact on households’ time allocation patterns. Analysis explains that in the post-2009 period, increasing incidents of terrorism triggered fear in the people’s minds. Consequently, time for business activities shrunk while the time for leisure increased. To be more exact, households preferred to stay at home and spend time on leisure activities (with no financial yield) rather than engaging in business activities.