Tourism Development and Economic Growth: A Global Analysis Based on Panel Causality and Co-Integration Tests Robust to Cross-Section Dependency

Abstract

This study investigates the co-integration and causality relationships between tourism development and economic growth for 136 countries categorized into five different income levels, that is, as low-income, lower middle-income, upper middle-income, high-income Organisation for Economic Co-operation and Development (OECD), and high-income non-OECD countries. A long-run relationship is examined using Westerlund’s (2007) panel co-integration test and causality relationship and Emirmahmutoglu and Kose’s (2011) panel causality test, both of which allow for cross-section dependency and heterogeneity. The results show that tourism can be an engine of economic growth, but only in low-income countries and in the short run. However, in the long run, economic growth contributes to tourism development.