How Fast Are the Tourism Countries Growing? The Cross-country Evidence

Abstract

Specializing in is an option available to a number of less developed and regions. But is it a good option? To answer this question, we have compared the relative growth performance of 14 tourism countries within a sample of 143 countries, observed during the period 1980-95. Using standard OLS cross-country growth regressions, we have documented that the grow significantly faster than all the other sub-groups considered in our analysis (OECD, Oil, LDC, Small). Moreover, we have shown that the reason why they are growing faster is neither that they are poorer than the average; nor that they have particularly high saving/investment propensities; nor that they are very open to trade. In other words, the positive performance of the is not significantly accounted for by the traditional growth factors of the Mankiw, Romer and Weil type of models. Tourism specialization appears to be an independent determinant. A corollary of our findings is that the role played by the sector should not be ignored by the debate about whether smallness is harmful for growth (e.g. Easterly and Kraay (2000), who conclude that there is no growth disadvantage in smallness). Half of the thirty classified as microstates in this literature are heavily dependent on tourism. Once this distinction is adopted, it is easy to see that the small perform much better than the remaining small countries. In our findings, smallness per se can be bad for growth, while the opposite is true when smallness goes together with a specialization in tourism.