Gravity Model of Tourist Flows

Because its structure mirrors Newton's law of gravitation: just as gravitational attraction between two bodies rises with the product of their masses and falls with the distance between them, the tourist flow between two countries rises with the product of their economic masses — population and income — and falls with the distance and cost of travel. The analogy is more than cosmetic; Morley, Rossello, and Santana-Gallego show the same functional form can be derived from individual utility maximization, giving it an economic rather than merely physical justification.

Multilateral resistance, introduced by Anderson and van Wincoop for trade, is the idea that flows between two countries depend not only on the cost between them but on their costs relative to all other partners. A destination's appeal to a given origin depends on how it compares with every alternative destination. Omitting these terms biases the estimated effects of distance and other variables. In practice they are controlled with origin and destination fixed effects or constructed resistance indices, which is now essential for a credible tourism gravity model.

Many country pairs have little or no recorded tourism, producing zeros that have no logarithm and would be dropped by a log-linear regression, biasing the estimates. The standard solution is to estimate the gravity equation in its multiplicative form using Poisson pseudo-maximum-likelihood (PPML), which naturally accommodates zero flows and is robust to the heteroskedasticity typical of flow data. Adopting PPML rather than log-OLS is one of the main methodological lessons the tourism literature imported from modern trade econometrics.