Terrorism and International Air Travel: A Gravity Approach

31 Pages Posted: 16 Nov 2018

See all articles by Devashish Mitra

Devashish Mitra

Syracuse University - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Cong S. Pham

Deakin University, School of Accounting, Economics and Finance

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division; IZA Institute of Labor Economics; West Virginia University

Date Written: November 2018

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.

Keywords: air passengers, airline industry, gravity equation, international trade, terrorism

Suggested Citation

Mitra, Devashish and Pham, Cong S. and Bandyopadhyay, Subhayu, Terrorism and International Air Travel: A Gravity Approach (November 2018). The World Economy, Vol. 41, Issue 11, pp. 2852-2882, 2018. Available at SSRN: https://ssrn.com/abstract=3285407 or http://dx.doi.org/10.1111/twec.12680

Devashish Mitra (Contact Author)

Syracuse University - Department of Economics ( email )

The Maxwell School of Citizenship & Public Affairs
133 Eggers Hall
Syracuse, NY 13244-1020
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Cong S. Pham

Deakin University, School of Accounting, Economics and Finance ( email )

75 Pigdons Road
Victoria, Victoria 3216
Australia

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
PO Box 442
St. Louis, MO 63011
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

West Virginia University ( email )

Morgantown, WV 26506-6025
United States
304-293-7879 (Phone)
304-293-7061 (Fax)

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