The Nuanced Impact of Visa Policies on Inbound Tourists

Tourism has grown into one of the world’s largest industries, and its dispersed nature has made it a valuable lever for boosting national economies. Consequently, a country’s ability to attract inbound tourism is closely tied to its economic wellbeing. Using panel data on bilateral tourist flows and visa restrictions from 2016-2019, this paper investigates whether liberalising visa policies truly increases inbound tourists. A structural gravity model is used to estimate the causal impact of over 1,300 policy liberalisations, and 400 instances of policies being tightened. This paper demonstrates that liberalising visa policies has an overall positive effect on tourist arrivals, but the effect weakens with distance, as visa costs become a smaller share of total travel burden. This paper also finds that tourists going to low-GDP destinations are far more sensitive to policy changes than high-GDP countries, hinting at a destination’s demand elasticity. These findings suggest that countries should consider distance, as well as their own demand elasticity, when designing visa policies to maximise their tourism potential.