DP14275 Terror and Tourism: The Economic Consequences of Media Coverage

Author(s): Timothy J. Besley, Thiemo Fetzer, Hannes Felix Mueller
Publication Date: January 2020
Keyword(s):
JEL(s): D74, D83, F14, F15, H12, L82
Programme Areas: Development Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14275

This paper studies the economic effects of news-coverage of violent events. To do so, we combine monthly aggregated and anonymized credit card data on tourism spending from 114 origin countries and 5 tourist destinations (Turkey, Egypt, Tunisia, Israel and Morocco) with a large corpus of more than 446 thousand newspaper articles covering news on the 5 destination countries from a subset of 57 tourist origin countries. We document that violent events in a destination are followed by sharp spikes in negative reporting at origin and contractions in tourist activity. Media coverage of violence has a large independent effect on tourist spending beyond what can be accounted for by controlling for the incidence of violence. We develop a model in which tourist beliefs, actual violence and media reporting are modelled together. This model allows us to quantify the effect of violent events and reporting.