International Information Disparity, Sticky Information, and Economic Behavior: Tourist's Response to Region-Specific Shocks
TGU-ECON Discussion Paper Series #2021-2
26 Pages Posted: 8 Jul 2021
Date Written: July 5, 2021
Abstract
This study investigates how region-specific shocks affect international behavior of individuals when information is partially or scarcely spread across the border. We use both local and international tourist data pertaining to Hakone in Japan, to focus on two exogeneous region-specific shocks of natural disasters: the Great East Japan Earthquake and volcanic activity on Mount Hakone. Hotel guests' response to these shocks is estimated by smooth local projections. We find that the responses of less-informed foreign guests are different from those of domestic well-informed guests. Because of insufficient and sticky information, the Great East Japan Earthquake and its aftermath lead to a decrease in the number of foreign guests at a rate greater and more persistently than domestic guests. Conversely, because of the absence of information, changes in volcanic alert levels have no impact on foreign guests, but they have negative and persistent effects on domestic guests.
Keywords: International information disparity, International behavior, Region-specific shocks, Smooth local projections, Sticky information
JEL Classification: D80, F20, F62, Z30
Suggested Citation: Suggested Citation