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.