Abstract
From an idealistic viewpoint, the existence of the tourism industry in a country/region is a blessing because of its anticipated sustainable economic benefits. To turn this idealistic state into a realistic one, institutions need to play a pivotal role in optimizing the desired incentives. The present study examines the asymmetric role of institutional quality in stimulating tourism inflows (receipts and arrivals) in selected Asia Pacific countries involved in tourism. The previous literature has established that improving institutional quality attracts tourism inflows to a destination. However, the literature fails to identify the specific point (threshold level) above (below) which the relationship turns positive (negative). To the best of our knowledge, this is the first study that estimates the asymmetries in the nexus of institutions and tourism inflows, using robust nonlinear autoregressive distributed lag approach. Our results show that the tourism inflow in Asian Pacific countries responds asymmetrically to any changes in institutional quality, and there is a single threshold of 7.52 points, where the impact of institutional quality reverses. We conclude that our findings are robust to the alternative measures of tourism inflows. The study offers useful policy inputs for devising short and long-run policies for the betterment of the institutional framework in the region by understanding the asymmetric impact of institutional quality on tourism inflow.
Highlights
Background and MotivationTourism is steadily growing as a strong pillar of sustainable development in the world
With an alternative measure of tourism inflows such as tourism_arrivals, we find that the connection is linear in the case of China, India, and South Korea, while in Hong Kong, Indonesia, Japan, Malaysia, Singapore, and Thailand the nexus of institutional quality and tourism_arrivals is non-linear
The findings offer important policy inputs for regulators and policymakers to maintain a minimum level of institutional quality of at least 7.52 points, in order to yield positive benefits of tourism inflows because when institutional quality drops below this point, it results in a negative impact on tourism inflows
Summary
Tourism is steadily growing as a strong pillar of sustainable development in the world. To estimate the potential asymmetric relationship between tourism inflow and its institutional and economic determinants, our study employs the methodology of asymmetric cointegration in the non-linear framework. Under this paradigm, the asymmetric (non-linear autoregressive distributive lag) methodology of Shin and Yu [16] was considered. With the presence of possible nonlinearities in the relationship between institutional quality and tourism inflow, along with a set of control variables, the application of the nonlinear autoregressive distributive lag technique enriches the existing literature on tourism inflow, and in this case for Asian Pacific tourism modelling.
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