Tourism, Security and Safety From Theory to Practice

Data Sources
Two principal data sources are used to estimate the system defined by equations (1)
through (4). Total bed (room) stocks, quantities of bed nights sold to Israelis and for-
eigners, total revenues in each market, and total wage payments are published
monthly by the Israeli Central Bureau of Statistics (1992–1999). All other variables,
except for the terror index, were compiled from annual World Bank data (World
Bank, 2000). In foreign country 
i
, the substitute cost relevant to this analysis is an
average of the expenses which 
i
th-country tourists incur at sites other than in Israel,
weighted by 
i
th-country expenditures at those sites. Aggregate substitute cost SCF in
foreign demand from equation (2) is then constructed as a weighted average, across
the nations from which Israeli tourists are drawn, of those weighted expenditures,
weighted by the shares of each tourist-generating country in total foreign tourist num-
bers in Israel in 1997. GNPF is similarly constructed as a weighted average of gross
national products in the countries from which foreign tourists originate. Because
GNP data are reported only annually, monthly figures were derived by linear inter-
polation, assuming constant GNP growth in a given year.
Our measure of the terrorist climate in Israel is taken primarily from Krakover
(2000). In Krakover’s index, zero represents a month with no terrorist event and
nine a period of full-scale regional war. Intermediate values reflect the numbers of
deaths or injuries in a given month or the magnitude of a limited war. To better
reflect the euphoria surrounding especially positive events, we extended this index
to include the signing of peace treaties, as shown in the Appendix. Between 1991
and 1998, such “peace” events occurred only twice, in each of which Israel signed
a treaty with the Palestinians or with Jordan.
We divide the year into six parts and define a dummy variable for each part as fol-
lows: March and April (S
1
); May and June (S
2
); July and August (S
3
); September and
October (S
4
); November (S
5
); and December, January, and February (S
6
).