TERRORISM AND INTERNATIONAL TOURISM

Terrorism and International Tourism

Abstract

This paper analyses the impact of terrorist activity on international tourist flows. To this end, we have estimated a cross-sectional gravity equation for tourism from the G-7 countries to a sample of 134 destinations over the period 2001-2003. Within this framework, we evaluate the deviation from 'normal' tourist flows due to terrorist activity, which is considered as negative advertising for the affected country. The analysis suggests that both domestic victims and international attacks are relevant factors when foreign tourists make their choice. This result is robust under alternative specifications. Moreover, the impact of terrorism is more severe in developing countries.

Keywords: Domestic terrorism; International terrorism; Gravity model; Negative advertising; Tourist flows

Terrorism and International Tourism

INTRODUCTION

The causes and economic consequences of terrorism have become worthy of the attention of both scholars and policymakers after the terrorist attacks in New York (9/11/2001) and, more recently, in Madrid (3/11/2004) and London (7/7/2005). Although a number of contributions were made after September 11th, this topic still remains relatively unexplored in economics. Generally speaking, terrorism is defined as1 'the premeditated use or threat of use of violence by individuals or subnational groups to obtain a political or social objective' (Rosendorff and Sandler, 2005). International terrorism takes place when the target involves two or more countries through its perpetrators, victims or audience, whereas in domestic terrorism both perpetrators and victims belong to the host country. In the first case, intervention in foreign affairs seems to be the main objective. In the second case, wealth redistribution and separation are the aspirations. The paper is structured as follows. Section 2 presents the theoretical framework. Section 3 describes the empirical model. Section 4 depicts the data and the measurement of variables. Section 5 contains the estimations and the analysis of results. Some policy implications can be found in Section 6. Finally, section 7 concludes.

THEORETICAL FRAMEWORK

The study of tourists' destination choice has been theoretically raised from two perspectives. The first is the traditional demand model.11 The second is the Gorman (1980)/Lancaster (1966) characteristics framework. As pointed out by Papatheodorou (2001), a number of reasons make traditional demand theory inappropriate when it comes to explaining tourism flows. Essentially, the shortcomings of this approach are focused on three aspects: considering a typical tourist visiting simultaneously all the destinations, the static nature of the analysis, which impedes the emergence of new destinations and the withering of others and, finally, the absence of product differentiation. The alternative to the classical consumer choice scheme was first presented by Rugg (1973), who applied characteristics methodology to tourism. Based on Rugg (1973), Papatheodorou (2001) extends the analysis with the aim of deriving the consequences in the alteration of the parameters of the model on tourist destination choice. From our point of view, this gives us the appropriate benchmark to assess the impact of terrorism on tourism.

Rugg (1973) develops a model in a system of N destinations in which the maximization of utility is subject to time, income and consumption technology constraints ...