Regional Effects of Terrorism on Tourism in Three Mediterranean Countries

Abstract

A consumer-choice theoretical model is developed to test the regional effects of terrorism on competitors' market shares in the tourism sector where involved countries enjoy significant tourism activities but are subject to a high frequency of terrorist attacks. Using data for three Mediterranean countries—Greece, Israel, and Turkey—for the period from January 1991 to December 2000, results show significant own and spillover effects of terrorism on market shares. Terrorist incidents are decomposed to better identify the impacts of terrorism on tourism. Significant contagion effects of terrorism on market shares in the region are documented, as is evidence of the effect of terrorism on the substitutability between countries.

Economically Targeted Terrorism: A Review of the Literature and a Framework for Considering Defensive Approaches

“…23 One issue raised about aggregate assessments of economic performance during periods of terrorist violence involves the complications associated with "counting" expenditures for security and other responses to the terrorist threat as part of a region's economic output. Such economic activity, which would not occur in the absence of terrorism, is, in some ways, "artificial" and can apparently compensate for some of the reductions in economic activity caused by the violence (New Ireland Forum, 1983, p. 18). Additional studies have assessed the effects of terrorism on individual industry sectors such as airlines (Ito and Lee, 2005) and tourism (Enders, Sandler, and Parise, 1992;Drakos and Kutan, 2003;Fleischer and Buccola, 2002). Similar approaches have been applied to other elements of economic relationships between nations, including the effects of long-term terrorism and violence on trade flows (Nitsch and Schumacher, 2004;Walkenhorst and Dihel, 2002) and FDI (Enders and Sandler, 1996;Abadie and Gardeazabal, 2005).…”

“…As we saw in both the 9/11 and PIRA examples, tourism is a prime case, in which areas hit by terrorism are clearly hurt as individuals pass them over in favor of locales they perceive as safer (see Enders, Sandler, and Parise, 1992;Drakos and Kutan, 2003;Ito and Lee, 2005, p. 75;Fleischer and Buccola, 2002;Enz and Canina, 2002;and Stafford, Yu, and Armoo, 2002):…”

The Economics of Terrorism and Counter-Terrorism: A Survey (Part II)

“…53 These changes in demand patterns due to risk aversion become visible in the impacts on different sectors of the economy, some of which (as we will discuss later) have suffered substantial losses due to fear of terrorism. As an important policy conclusion, Drakos and Kutan (2003) point out that state aid to companies suffering from adjustments in consumer demand due to terrorism will be futile in cases where demand has permanently changed.…”

“…Pizam and Fleischer (2002) Israel, Monthly Data 1991Data -2001 A high frequency of terrorism is more dangerous to tourism flows than the severity of these attacks. Drakos and Kutan (2003) Greece, Italy and Turkey, Monthly Data 1991Data -2000 Terrorism reduces tourist arrivals, reducing market shares of targeted countries. Terrorism also produces regional spill-over effects, making tourism in a "terrorism infected" region generally less attractive.…”

“…First, several studies detect negative effects of terrorist strikes on the tourism sector, particular analyzing the impact of terrorism on tourism in countries that are strongly dependent upon income streams from tourism (e.g., Enders and Sandler 1991;Enders et al 1992;Drakos and Kutan 2003). For instance, Enders et al (1992) find that terrorist activity in Greece, Italy and Austria has led to substantial economic losses for these countries in the 1970s and 1980s.…”