1 2 3 4 5 6 OLS OLS IV IV IV IV lagged non OECD exporters OECD ex porters log

1 2 3 4 5 6 ols ols iv iv iv iv lagged non oecd

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tourist flows on the export of certain product groups from non-OECD exporters. (1) (2) (3) (4) (5) (6) OLS OLS IV IV IV IV lagged non- OECD exporters OECD ex- porters log tourists 0.603*** 0.068*** -0.298* 0.063 -0.061 -2.991 (0.010) (0.011) (0.174) (0.159) (0.140) (3.496) log GDP exp 0.783*** 0.450*** 0.316*** 0.121 1.529* (0.011) (0.082) (0.079) (0.090) (0.805) log GDP imp 0.359*** (0.012) log real exch rate 0.099*** 0.020 0.028** 0.017 0.048 -0.015 (0.009) (0.029) (0.013) (0.012) (0.039) (0.041) RTA 0.840*** 0.044 0.165*** 0.143*** 0.141*** 0.462 (0.044) (0.029) (0.032) (0.031) (0.047) (0.412) GATT exporter 0.159*** 0.429*** 0.300*** 0.420*** 2.645 (0.060) (0.058) (0.049) (0.046) (2.892) GATT importer -0.316*** (0.057) common currency 0.336*** 0.089** 0.131** 0.123** 0.125 (0.096) (0.045) (0.057) (0.054) (0.185) Observations 108387 108182 108188 97029 69168 38991 R 2 0.706 0.941 0.915 0.926 0.891 0.657 FE none it, jt, ij jt, ij jt, ij jt, ij jt, ij First Stage log casualties -0.017*** -0.017*** -0.029*** 0.002 (0.002) (0.002) (0.002) (0.002) F-stat first stage 66.11 69.08 69.85 47.90 Table 1. Main results of the effect of tourism on bilateral trade flows. Columns 2-6 include country-pair ij and importer-year jt fixed effects while column 2 also includes exporter-year it fixed effects. All variables are demeaned over the exporter dimension in columns 3-6 to account for exporter multi-lateral resistances. Standard errors are clustered by country-pair ij . Significance levels *p < 0.10, **p < 0.05, ***p < 0.01. Columns 3-6 use 2SLS regressors with the log casualties from terrorism as instrument for tourist flows. 5 Which products benefit from tourist flows? The evidence presented so far suggests that there is no effect of tourism on the exports of non-OECD countries and that the instrument is not valid for OECD exporters. This section investigates whether estimated effects from tourism on trade differ by product groups. Tourists are more likely to be exposed to certain products than others. One expects that it is the more differentiated products that are affected because tourists are more likely to associate a differentiated product with the destination country than they would do for a homogeneous product. To investigate the effects of tourism at the product level, I use the Broad Economic Classification (BEC) product classification. This classification has the advantage of classifying the products broadly but sufficiently such that zero or missing trade flows are minimized. This classification also makes a 9
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distinction between differentiated and less differentiated products which is of interest to this paper. I therefore estimate equation 1 for 5 main product groups separately for non-OECD countries and report the results in Table 2. These are industrial supplies, capital goods, consumer goods not else specified (nes), and primary and processed food products. The results confirm what one would expect, i.e. the products that benefit from tourism are the differentiated or processed foods and beverages. The elasticity is 0.49 meaning a 10% increase in tourist flows to a given destination leads to an increase of 4.9% in the exports of processed food and beverages from the tourist destination to the home country of the tourists. This suggests that tourists develop a taste for processed food and beverages when they come in contact with them on their trip and this leads to higher demand for such products upon returning home. This result is what one would expect if tourism has any effect on exports because these products are typically cultural products and tourists are very likely to come in contact with them during their travels.
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