Does Proximity to Conflict Affect Tourism: Evidence from NATO Bombing

Sa？etak Although con？ict, war, violence, and terrorism naturally affect tourism, research that identi？es possible channels through which these effects propagate is scarce. We explore if the adverse effects are channeled through proximity to con？ict areas. We use the con？ict in Kosovo in 1999 and the country Croatia as a quasi-natural experiment and take advantage of the speci？c 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 ？rms in the 1993–1999 period and the difference-in-differences identi？cation strategy we ？nd that tourism companies’ revenues decreased signi？cantly due to NATO bombing, especially in accommodation services and in companies with 50 or more employees. By analyzing heterogeneous effects with respect to the distance of the ？rm from Kosovo—using a linear and a more ？exible model—we argue that within-country proximity to con？ict is not a signi？cant channel through which the negative effect propagates