The Relationship Between Tourism and Economic Growth in The Scope of Economic Freedom and Freedom of Investment

Abstract

Tourism is one of the sectors to which countries have recently given importance as a means of ensuring economic growth, and the relationship between the two has been the subject of many study in economic literature within the framework of four hypotheses; being tourism-oriented growth, feedback, protection, and neutrality. In the present study, the relationship between tourism and economic growth is investigated for Mediterranean countries in the 2006–2019 period. A Dumitrescu-Hurlin Panel Causality Analysis was carried out in the study in which economic growth, tourism revenues, economic freedom, and investment freedom data were used as variables. The analysis was carried out both across the panel and on the basis of countries. Panel analysis results showed that tourism revenues are the cause of economic growth, which confirms the tourism-oriented growth hypothesis. That said, the causality relationship between economic growth, tourism revenues, and economic freedom cannot be determined based on the panel-wide results, as the results differ from country to country. Finally, a two-way causality between economic growth and freedom of investment, and a one-way causality from tourism revenues to freedom of investment has been identified.