Terror and Tourism: The Economic Consequences of Media Coverage

• Authors: Hannes Mueller.
• BSE Working Paper: 112219 | January 20
• Keywords: tourism , media bias , availability heuristics , mortality risk , terror , armed violence , supervised machine learning , economic integration , random forest
• JEL codes: O1, F5, F1, L8
• tourism
• media bias
• availability heuristics
• mortality risk
• terror
• armed violence
• supervised machine learning
• economic integration
• random forest

We combine monthly aggregated and anonymized credit card data on tourism spending from 114 origin countries in 5 tourist destinations (Turkey, Egypt, Tunisia, Israel and Morocco) with a large corpus of news coverage of violent events. This allows us to separate the effect of events at the destination from the effect of news reporting at the origin of cardholders. We develop a model of tourist beliefs, actual violence and news coverage to quantify the effect of coverage. When a country is perceived as dangerous, aggregate spending falls by 55 percent. More than half of this effect comes from media coverage.