Abstract
This study examines the nonlinear impact of tourism development on economic growth in Southeast Asian countries using the panel kink regression model. Due to the paucity of Southeast Asian data, we may face the overparameterization problem in our model. To deal with this problem, this study proposes the Generalized Maximum Entropy (GME) estimator to estimate the unknown parameters in this nonlinear model. Several important tourism development indicators consisting of the total international arrivals, international tourism expenditure, and tourism receipts are considered. In addition, we also consider the gross capital formation and real effective exchange rate as a control variable in our nonlinear model. Our findings show that the effect of international tourist arrivals on economic growth should be separated into two regimes, while other factors do not exhibit a nonlinear relationship with Southeast Asian economic growth. Thus, we construct the empirical model with the kink effect in the variable of international tourist arrivals. To confirm the performance of the GME estimator, we compare it to the ordinary least squares and the fixed effect estimators. According to the mean squared and root means squared errors, we find that our GME estimator performs better than the ordinary least squares and the fixed effect estimators. This indicates that GME estimation is an applicable method for estimating the nonlinear effect of tourism growth on economic growth. Our empirical results show that there are positive impacts of tourism growth on economic growth for regime 1 (low tourism demand) and regime 2 (high tourism demand) with the effect of the low tourist arrivals regime being relatively larger. We also find a positive influence of gross capital formation, real effective exchange rate, international tourism expenditure, and tourism receipts on Southeast Asian economic growth.
Highlights
Tourism is one of the largest and rapidly growing sectors in the world
Comparison is made between the pooled ordinary least squares and the pooled Generalized Maximum Entropy (GME), which are the OLS and GME techniques run on panel data
It is believed that tourism development has a positive contribution to the overall economy of tourism destinations
Summary
Tourism is one of the largest and rapidly growing sectors in the world. Many developing economies rely heavily on this service sector for the purpose of sustainable economic growth [1,2].Nowadays, tourism has become one of the major industries in many countries, the emerging economies, with its development playing a key role in increasing income and creating new employment opportunities in the tourism-related sectors and for the country. Tourism is one of the largest and rapidly growing sectors in the world. Many developing economies rely heavily on this service sector for the purpose of sustainable economic growth [1,2]. Tourism has become one of the major industries in many countries, the emerging economies, with its development playing a key role in increasing income and creating new employment opportunities in the tourism-related sectors and for the country. As a part of the emerging tourists’ places of interest worldwide, the Southeast Asian (Association of South-East Asian) countries are among the top growing tourism destinations, accounting for about one-third of the international tourist arrivals. Southeast Asian countries have an abundance and diversity of natural, economic, and cultural resources, offering great potential for tourism development
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