The economic impact of global uncertainty and security threats on international tourism

Abstract

Uncertainty and safety issues limit the expansion of the tourism sector. Previous literature has explored the impact of security problems on tourist flows, especially terrorism. However, the difficulty of measuring tourism in monetary terms has limited the ability to evaluate the economic costs of security and uncertainty. This paper brings together a worldwide gravity model for international tourist arrivals from 1995 to 2016 and an inter country input-output model for estimating the economic impact of terrorism, corruption and economic policy uncertainty in monetary terms. The research provides estimates of variations in tourist arrivals and value added under different scenarios, ranging from total security to maximum insecurity and uncertainty values at country and regional levels. Results show that the value added generated by tourism would increase by 14.3% if uncertainty and insecurity in each of the countries fell to their minimum level, and would decrease by 17.5% if they increased to their maximum level.