The impact of political violence on tourism

Now that Lebanon and Israel are at it again, one can ask whether this can have an economic impact. The prime candidate (a part for the defense industry) is the tourism industry. Casual empiricism seems to indicate that tourist react very strongly to very small probabilities of danger and thus should be deserting those countries.

David Fielding and Anja Shortland look at the case of Egypt, which has suffered from Islamist fundamentalist violence for the last two decades, sometimes targeted at tourists. They find that tourists stay away when violence has occurred, but only when it was directed towards tourists. Violence among locals has no impact. And when the Egyptian government takes (usually heavy-handed) counter-terrorism measures, European tourists stay away, while US ones are not affected. Interestingly, there is substitution: Egypt's tourism industry benefits when things turn sours in Israel, at least if it does not mean local trouble.