Ubay Perez-Granja

This paper exploits a recent natural experiment to analyze the effect of volcanic eruptions on tourism expenditure. Using a Difference-in-Differences methodology, we find that volcanic eruptions have a positive impact on tourism expenditure, both aggregate expenditure and expenditure by category, and both during the eruption and the post-eruption period. We investigate the mechanisms behind the increase in expenditure and obtain strong support for the empathy mechanism, prevailing over other mechanisms such as changes in prices, the profile of tourists, or simply curiosity. Our results suggest that tourist empathy with the affected community manifests through consumption, finding that prosocial consumption increases in the cultural identification of the tourist with the affected area.