Are the tourism led-growth and public expenditure strategies counteract in the long-run:

Abstract

Purpose- The purpose of this study is to investigate the effects of tourism and public fiscal mechanisms on economic growth by using panel data of 41 countries which are classified as Upper and Lower Middle-Income Countries by World Bank from 1996 to 2014. Methodology- In order to accomplish this objective, we utilize both the static panel data approach and dynamic generalized method of moments (GMM) techniques to examine the impacts of explanatory variables on the dependent variable. Findings- Our findings indicate that specialization in tourism per se or relying just on the public expenditure may have a significant negative effect on GDP per capita growth in developing countries. On the other hand, our study strongly supports the positive effects of openness and female workforce. But growing population and labor force participation rate -which are also statistically significant-, led per capita growth through to the undesired risky levels in the economy. Conclusion- Contrary to consensus and expectations, our estimation results reveal the need for some structural changes or reforms both in public spending and tourism-led growth strategies in the long run.