This paper estimates the size of the media multiplier, an easily generalizable model-based measure of how far media coverage magnifies the economic response to shocks. We combine monthly aggregated and anonymized credit card activity data from 114 card issuing countries in 5 destination countries with a large corpus of news coverage in issuing countries reporting on violent events in the destinations. To define and quantify the media multiplier we estimate a model in which latent beliefs, shaped by either events or news coverage, drive card activity. According to the model, media coverage can more than triple the economic impact of an event. We document, through our model, that this effect is highly heterogenous and depends on the broader media representation of countries in each others news. We speculate about the role of the media in driving international travel patterns an.
The last working paper version can be downloaded here. The published version can be accessed here. It took us a long time to get this paper published so there are very old working paper versions under different titles still around. 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.
