Determining Terrorism Proxies for the Relationship with Tourism Demand: A Global View

Abstract

This study examines the determinants of the relationship between terrorism and tourism, by testing different proxies to assess both the frequency and the severity of terrorist activity. The methodological approach includes implementing Principal Component Analysis into four different sets of possible proxies for terrorism in order to examine their relationship with international tourism arrivals over the period 1998-2018. The dataset includes world tourist flows and terrorist incidents anywhere in the world in order to avoid regional effects. The empirical results show that all candidate proxies exhibit a long-run, negative relationship with tourism, while there is also an impact of tourism on terrorism, with conflicting directions between the short run and the long run. The findings suggest that increased terrorist activity may cause destination substitution in the short run but will have adverse effects in the long run. In addition, authorities should be prepared for a rise in terrorist incidents during periods with increased tourist flows. Finally, research on terrorism should take into account the qualitative characteristics of terrorist activities.