Outbound tourism and outward foreign direct investment

Abstract

Malik and Latif (2021, 2023) have conducted empirical research that demonstrates a positive relationship between Chinese outbound tourism and China's outward foreign direct investment. However, their studies possess significant flaws. Firstly, they fail to account for the heteroscedasticity of random errors, yielding flawed statistical inferences. Secondly, the control variables lack bilateral attributes between countries and overlook time-fixed effects, resulting in omitted endogeneity. Thirdly, their regressions inadvertently exclude a substantial number of observations due to missing values of the independent variable, introducing sample selection biases. This article aims to address these concerns by reanalyzing the empirical data and using a series of econometric methods to handle endogeneity issues. Our findings indicate that Chinese outbound tourism does not significantly influence China's outward foreign direct investment.