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Regional effects of terrorism on tourism: Evidence from three Mediterranean countries

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  • Drakos, Konstantinos
  • Kutan, Ali M.

Abstract

A consumer-choice model developed by Enders, Sandler and Parise (1992) is utilized to study the regional effects of terrorism on competitors’ market shares in tourism sector where involved countries enjoy significant tourism activities but are subject to high frequency of terrorist attacks. The theoretical model is tested for three Mediterranean countries, namely Greece, Israel, and Turkey, for the period from January 1996 to December 1999, using the seemingly unrelated regression model. Italy is used as a control variable in estimations, acting as a proxy for tourist activities in the rest of the Mediterranean region and providing an additional destination for tourists to visit. Evidence indicates that the tourism industry in Israel and Turkey are more sensitive to terrorism incidents than in Greece. There are also significant regional contagion effects of terrorism. We find that a higher level of terrorist incidents in Greece is associated with an increase in the relative market share of Israel in the region, while terrorism in Israel benefits Turkey’s market share. We also document evidence that the location (urban versus rural) and the intensity of terrorist incidents play an important role in the decision-making process of tourists for choice of destinations. Policy implications of our findings are also discussed.

Suggested Citation

  • Drakos, Konstantinos & Kutan, Ali M., 2001. "Regional effects of terrorism on tourism: Evidence from three Mediterranean countries," ZEI Working Papers B 26-2001, University of Bonn, ZEI - Center for European Integration Studies.
    • Handle: RePEc:zbw:zeiwps:b262001
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    References listed on IDEAS

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    1. Atkinson, Scott E & Sandler, Todd & Tschirhart, John, 1987. "Terrorism in a Bargaining Framework," Journal of Law and Economics, University of Chicago Press, vol. 30(1), pages 1-21, April.
    2. Lapan, Harvey E & Sandler, Todd, 1988. "To Bargain or Not to Bargain: That Is the Question," American Economic Review, American Economic Association, vol. 78(2), pages 16-21, May.
    3. Sandler, Todd & Lapan, Harvey E., 1988. "The Calculus of Dissent: An Analysis of Terrorists' Choice of Targets," Staff General Research Papers Archive 10818, Iowa State University, Department of Economics.
    4. Walter Enders & Todd Sandler & Gerald F. Parise, 1992. "An Econometric Analysis of the Impact of Terrorism on Tourism," Kyklos, Wiley Blackwell, vol. 45(4), pages 531-554, November.
    5. Sandler, Todd & Tschirhart, John T. & Cauley, Jon, 1983. "A Theoretical Analysis of Transnational Terrorism," American Political Science Review, Cambridge University Press, vol. 77(1), pages 36-54, March.
    6. Enders, Walter & Sandler, Todd & Parise, Gerald F, 1992. "An Econometric Analysis of the Impact of Terrorism on Tourism," Kyklos, Wiley Blackwell, vol. 45(4), pages 531-554.
    7. Lee, Dwight R, 1988. "Free Riding and Paid Riding in the Fight against Terrorism," American Economic Review, American Economic Association, vol. 78(2), pages 22-26, May.
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    More about this item

    Keywords

    Terrorism; Mediterranean tourism; time series; seemingly unrelated regression;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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