Evaluating the Impact of Crime on Tourism in Barbados: A Transfer Function Approach

The impact of crime on tourism to Barbados was examined using a transfer function approach. Results indicate that an increase in the overall crime rate has a negative and significant impact on arrivals to the island, and the fall-off is delayed, starting 6 months after a one-unit increase in the crime rate. The impulse response function shows that a 1% shock to crime reduces arrivals to Barbados, but takes about 20 months for arrivals to return to normalcy. This results in direct income losses of US$47,000 and indirect losses of US$108,000. Impacts for murder, assault with intent to rob, rape, and residential burglary rates were also investigated. Qualitatively, the results resemble those for the overall crime rate; however, the magnitudes of the impacts are greater and income losses are generally in the millions. Given the country’s dependence on tourism receipts to sustain its current account, shocks to the crime rate can lead to balance of payment problems. Since there is a lag before the impact of increases in crime takes its full toll on arrivals, it is advised that at the first sign of heightened criminal activity policy makers should act to minimize losses.