The economic consequences of political upheavals: the case of the Arab Spring and international tourism Jos´eL. Groizard, Mohanad Ismael & Mar´ıaSantana ∗ April 26, 2016 Abstract Political turmoil has negative repercussions on economic development. In this paper we provide evidence on how the great political shock known as the `Arab Spring' (AS), which occurred in 2011, has affected international tourist arrivals. We use a gravity model of tourism flows to ascertain to what extent inflows of tourists from the rest of the world changed before and after the political upheaval once we condition bilateral tourism demand on a wide range of observed and unobserved shocks. We find that foreign tourists' demand to travel to countries experiencing `Arab Spring' episodes was sharply reduced and that the AS magnified other extenuating shocks. We also find evidence of two different spillover effects: a contagion to other Arab countries that did not experience AS episodes, or if they did, on a minor scale, and a substitution effect in other competitor countries. We also find that these results are not due to the rise of terrorism in those countries after the `Arab Spring.' We quantify that tourism losses due to the AS produced annual decreases in GDP ranging from 0.5 to 2.9 percent. Keywords: political stability, terrorism, international tourism, gravity model, growth. JEL codes: F14, F51, H12, O11. ∗Groizard and Santana: Departament d'Economia Aplicada, Universitat de les Illes Balears (
[email protected],
[email protected]) and Mohanad Ismael: Economics Department, Birzeit University (
[email protected]). 1 Introduction In 2011, some Arab countries from the Middle East and North Africa (MENA) region became involved in episodes of political turmoil after experiencing a revolutionary wave of spontaneous demonstrations followed by widespread violent and non-violent protests.