MODELING HOUSEHOLD PARTICIPATION DECISIONS BETWEEN DOMESTIC AND INTERNATIONAL TRIPS BY SEMI-NONPARAMETRIC REGRESSIONS

Abstract

Globalization has caused many countries to experience significant slowdown, thus, tourism development becomes the primary policy to stimulate the economy. Investigating the demand of leisure activities is necessary for the development of a tourism industry with sound policies. This research adopts demographic data to allocate the factors affecting participation decisions and utilizes semi-nonparametric (SNP) regressions to analyze household decision regarding domestic and international trips. By combining a parametric component with a nonparametric component, the SNP method increases the flexibility of participation decision models from relaxing distributional assumptions. The results of this study reveal that decision-making for both domestic and international trips is jointly determined. Various factors, including income, capital gain ratio, age and education, are decisive to trip types, indicating the market segmentation of tourism businesses. Moreover, SNP regression performs superior to the traditional bivariate probit model, suggesting that the model developed in this research can provide comprehensive results for policy implications.