This paper uses novel data to show how the media amplifies the economic impact of newsworthy events - the media multiplier. Specifically, we combine monthly aggregated and anonymized card activity data from 114 card issuing countries in Turkey, Egypt, Tunisia, Israel, and Morocco with a large corpus of news coverage of violent events at these five destinations. To define and quantify the media multiplier we estimate a model in which latent beliefs, shaped by either events or news coverage, drive the behavior of heterogeneous agents. According to the model, card activity falls by 53 percent if a country is regarded as dangerous by all agents - more than half of this effect is due to the media multiplier.
The latest version of the paper is here. A previous version of the paper circulated under the title Terror and Tourism: The Economic Consequences of Media Coverage. A discussion of preliminary results can be found at the webpage of the IGC.
This is a very complete research project in that we pull together a unique set of data with data generated from supervised machine learning and combine it in a theoretical model of events, reporting and spending. Key to the development of the model was the insight that we can model the connection between objective facts and reporting through a latent state of "danger" which has representations both in terms of violence and news about the violence. In this way, we are able to derive two separate sets of beliefs for tourists depending on their information set (objective violence or news). Figure 2 in the paper illustrates how the model integrates these latent beliefs.