Terror and Tourism: The Economic Consequences of Media Coverage Timothy Besley Thiemo Fetzer Hannes Mueller∗ December 27, 2019 Abstract This paper studies the economic effects of news-coverage of violent events. To do so, we combine monthly aggregated and anonymized credit card data on tourism spending from 114 origin countries and 5 tourist destinations (Turkey, Egypt, Tunisia, Israel and Morocco) with a large corpus of more than 446 thousand newspaper articles covering news on the 5 destination countries from a subset of 57 tourist origin countries. We document that violent events in a destination are followed by sharp spikes in negative reporting at origin and contractions in tourist activity. Media coverage of violence has a large independent effect on tourist spending beyond what can be accounted for by controlling for the incidence of violence. We develop a model in which tourist beliefs, actual violence and media reporting are modelled together. This model allows us to quantify the effect of violent events and reporting. ∗Corresponding author: Mueller,
[email protected]. Besley is based at the London School of Economics, Fetzer at Warwick University and Mueller is based at IAE (CSIC) and the Barcelona GSE. We thank seminar audiences at Paris School of Economics, CAGE/Warwick University, Banco de Espana, CIREQ in Montreal, Barcelona GSE Summer Forum, London School of Economics, CUNEF Madrid. We are grateful to the International Growth Centre (IGC) and to the Mastercard Center for Inclusive Growth for their support. Mueller acknowledges financial support from the Spanish Ministry of Economy and Competitiveness, through the Severo Ochoa Programme for Centres of Excellence in R&D (SEV-2015-0563) and Grant number ECO2015-66883-P.