Economic freedom and international tourism: evidence from least developed countries

Abstract

This study utilises a dynamic panel data method to identify the short-run and long-run effects of host countries’ economic freedom on international tourism, focussing on the least developed countries (LDCs). Based on the panel data of 154 countries from 2002 to 2019, we find that the three broad aspects of economic freedom—property rights enforcement, regulatory efficiency, and market openness—have differential impacts on the LDCs and their more developed counterpart. LDCs are more responsive to an improvement in regulatory efficiency. Specifically, a more efficient labour market and stable price level in the host country attracts more inbound tourism. Tourism in developed countries, in contrast, is more responsive to an improvement in property rights enforcement. As such, we recommend countries consider their development status as they promote tourism.