Terrorism and international air travel: A gravity approach

Abstract

We present a theoretical model (adapted from the structural gravity model by Anderson and van Wincoop, American Economic Review, 93, 2003, 170) to capture the effects of terrorism on air passenger traffic between nations affected by terrorism. We then use equations derived from this model, in conjunction with alternative functional forms for trade costs, to estimate the effects of terrorism on bilateral air passenger service flows from 58 source countries to 26 destination countries during 2000–14. An additional small-scale terrorist incident in the origin country and destination country together results in a reduction in bilateral air passenger travel by, at least, 1.3% and 0.81%, respectively, for pairs of countries located 1,000 and 2,000 km or less apart. The adverse impact of transnational terrorism is approximately five times larger. Terrorism adversely impacts bilateral air passenger travel both by reducing national output and especially by increasing psychological distress. Last but not the least, international air passenger travel is found to be extremely sensitive to fatal terrorist attacks and terrorist attacks on targets such as airports, travel or tourists.