islands characteristics, increasing tourist arrivals will be maintained into the future (naturally, this applies equally to both positive and negative shocks). This issue also highlights the importance of digital presence to reinforce positive experiences.

A real devaluation of the currency increases tourist arrivals by a smaller margin, and increases total expenditures because expenditures increase more than the decline in tourist arrivals. The euro real exchange rate is statistically significant for both FE and Sys-GMM cases, while the US dollar and UK pound are marginally significant. As a result, a depreciation of the exchange rate results, in general, in an increment in the number of tourists. When the long-run elasticity is taken into account, it is less than one in all cases. Moreover, the test for those elasticities being equal to one is always rejected. As such, tourist arrivals respond relatively less when prices increase, and it determines that a pricing strategy that focuses on high-spending tourists is suitable. When looking at the real exchange rate effects on price, expenditures per tourist arrival, the effects show that an appreciation of the local currency results in an increment of total expenditures (because expenditures increase more than tourist arrivals decline). In this case, the effects are negative and significant for all currency comparison cases. The long-run elasticity is close to -1 in all cases.

# **IVb. LGBT tolerance and tourism**

It has been long hypothesized that tourism destinations could benefit from an inclusive attitude towards LGBT population. The tourism industry can take advantage of the rise of the global phenomenon of the “pink dollar” by creating an inclusive environment for international LGBT tourists. The “pink dollar” is the term used to describe the purchasing power of sexual and gender minorities. Sexual and gender minorities are more likely to spend their money on travel, and when they do, they are more likely to explore new destinations, provided those are safe.

Lack of appropriate data has been an issue to establish causal relationships relating to this, but the recent trend in changing legal environment can help to establish this relationship. Using a data set on the LBGT environment prepared by the World Bank, we explore the effect of changing the legislation with respect to criminalization of LGBT using a difference-in-differences (d-in-d) approach. This paper, in particular, uses a dummy variable that takes the value 1 if the country does not criminalize LGBT and 0 otherwise, and it matches the data in Table 1 of Cortez and Arzinos (2019) to our sample data, resulting in 15 countries that appear in both samples. Since there are some countries that changed their legal attitude towards LGBT (e.g., STP does not criminalize LGBT since 2012), it can explore if the change in legislation is associated with an effect on tourism arrivals. The identification analysis, as it is common in difference-in-difference, is based on the assumption that controlling for observable characteristics, the timing of the implementation of the change in LGBT legislation is not related to other tourism related policy.

Positive attitude towards LGBT population, as measured by not criminalizing LGBT, positively impacts tourist arrivals. Table 6 presents the d-in-d econometric estimators for log of tourism arrivals (columns (1) and (2)) and log of expenditures per arrivals (columns (3) and (4)). Column (1) provides a point estimate of 0.431, statistically significant at 5 percent level, implying that removing the criminalization of LGBT would increase tourism arrivals by 43 percent. Including additional 12