The nexus between tourism and regional real growth: dynamic panel threshold testing

Abstract

This study analyzes the nexus between tourism and regional real growth for European regions at the Nomenclature of territorial units for statistics (NUTS), level 2, for the period 1995-2019. The study uses the dynamic panel threshold model to analyze complex relations between variables. As the dependent variable, we chose real growth rate of regional gross value added at basic prices by NUTS 2 regions. The independent variable is regional arrivals at tourist accommodation, while the control variables are health, household income, and employment at NUTS 2 regional level. The study found the threshold variable for 95% confidence interval. The marginal effects in the low inflation regime are higher compared to marginal effects in the high inflation regime. The study results support tourism-led growth hypothesis, indicating tourism as a one of the main drivers of regional growth. This research contributes to rare literature in application of dynamic panel threshold model in tourism. As an implication, this study can be used as a methodological approach to analyze the impact of different variables (not only tourism, but also innovations, technology, well-being, etc.) on regional growth, especially in countries with high regional differences, such as the Commonwealth of Independent States (CIS), Latin America, etc.