When a terrorist attack occurs in a country, it seems natural to expect that international tourists would be dissuaded from visiting that country. How big an effect does terrorism have in reducing international tourism arrivals? That is essentially the question addressed in this 2018 article by Devashish Mitra (Syracuse University), Cong Pham (Deakin University), and Subhayu Bandyopadhyay (Federal Reserve Bank of St. Louis), published in the journal The World Economy (ungated version here).
Their data covers the period 2000-2014, with bilateral air passenger travel between 58 source countries and 26 destination countries, drawn from the UN Service Trade Database, and terrorism data from the Global Terrorism Database maintained by the University of Maryland. They limit the terrorism data to:
...all non-state terrorist attacks that the GTD can classify without uncertainty as terrorist incidents to construct the measure of terrorism as our main explanatory variable of interest...
For the analysis, they employ a gravity model approach (which I have used in my own research, and previously described here and here). Mitra et al. find that:
...terrorism adversely and significantly impacts bilateral air passenger travel. What is the economic significance of our estimates? According to the results... a 10% increase in the number of terrorist incidents in the source country and the destination country results in a reduction in bilateral air passenger travel at least approximately by 1% annually for pairs with bilateral distances of 1,000 km or less... It equivalently means that an additional terrorist incident, which usually is of very small scale and non-fatal, can cause average bilateral air passenger travel between those source and destination countries to decrease by at least 1.3% or US$0.9 million approximately... Similarly, for pairs of countries with bilateral distance being 2,000 km or less an additional terrorist incident causes approximately a 0.82% decrease in their bilateral air passenger travel.
They also find that transnational terrorism has larger effects, and present a number of robustness checks of the results. However, I want to stop things right here, because there are two major problems with their analysis. First, their dependent variable is the dollar value of air passenger travel. That is problematic because the value of air passenger travel is made up of the number of air passengers multiplied by the cost of their travel. Theoretically, we might expect the number of air passengers to decrease due to terrorist attacks. However, the theoretical effect on the cost of travel is indeterminate. If the demand for air travel decreases, prices will decrease. However, if the supply of flights decreases, prices will increase. These effects offset each other. And besides that, I would argue that we should be more interested in the number of air passengers anyway, not the value of air passenger travel.
Second, the key explanatory variable (terrorism) is also problematic, because they measure it as the total number of terrorist attacks in both the origin (where the air passengers are coming from) and the destination (where the air passengers are going to). As noted at the start of this post, terrorism should dissuade international air travel. However, that applies to terrorist attacks at the destination. It doesn't apply to terrorist attacks at the origin. In fact, you could argue that terrorist attacks at the origin should increase international air travel, as people try to escape the risk of terrorism. So, again, the effect of terrorism as Mitra et al. measure it on air passenger travel is theoretically indeterminate.
Combining those two problems, I think the analysis doesn't really tell us much at all about how terrorism affects international air travel, because both the dependent variable and the key explanatory variable are both mis-measured. However, there is clearly an opportunity for some follow-up work by a good Honours or Masters student, using more appropriate data to explore the same research question.
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