Third International Conference on Tourism & Leisure Studies

Abstract

Although conflict, war, violence, and terrorism naturally affect tourism, research that identifies possible channels through which these effects propagate is scarce. We explore if the adverse effects are channeled through proximity to conflict areas. We use the conflict in Kosovo in 1999 and the country of Croatia as a quasi-natural experiment and take advantage of the specific north-west to south-east orientation of Croatian Adriatic counties to identify the effect of NATO bombing in Kosovo on tourism outcomes as well as the potential proximity channel. Using data on the population of Croatian firms in the 1993–1999 period and the difference-in-differences identification strategy we find that tourism companies’ revenues decreased significantly due to NATO bombing, especially in accommodation services and in companies with fifty or more employees. By analyzing heterogeneous effects with respect to the distance of the firm from Kosovo—using a linear and a more flexible model—we argue that within-country proximity to conflict is not a significant channel through which the negative effect propagates.