Tourism-led Growth Hypothesis Research Articles

Is Tourism-Led-Growth Hypothesis Valid in the Presence of Structural Breaks?

This study revisited the tourism-led growth hypothesis (TLGH) in the presence of structural breaks using the structural break technique of Ditzen et al. (2021). To estimate the impact of tourism on economic growth along the identified structural breaks, we employed Fixed Effects and Feasible Generalised Least Squares methods. Findings showed four structural break dates (1999, 2004, 2009 and 2014), two of which coincided with the Global Financial Crisis (2008-2009) and the Ebola outbreak (2014). Despite the presence of structural breaks, the TLGH remains valid.

Presence of Tourism-Led-Growth Hypothesis in Pakistan: Empirical Evidence with ARDL Model

Tourism has become the world’s third-largest export earning industry. According to the World Bank, in recent times international tourism has attracted a great attention and 7% of world’s total trade involves tourism. Tourism is considered one of the endogenous factors to boost the economic growth and development of any nation. It has versatile impacts on country growth and contributes directly and indirectly to GDP. The paper aims to bring forth confirmation of the tourism-led-growth hypothesis (TLGH) for Pakistan using time series data from 1995-2020 by incorporating inflation, international tourism, and tourism expenditure as regressors. For checking the stationarity of time series data, unit root tests Augmented Dickey-Fuller test (ADF) and Phillip Perron test indicate that Economic Growth and inflation are stationary at their first difference while tourism expenditure and number of international arrivals are stationary at level. ARDL approach has been utilized to establish the link to how tourism affects the economic growth of Pakistan and the Cumulative Sum of Recursive Residual (CUSUM) and CUSUM of square has been used to check the stability of the model. The result depicts that a long-run relation exists among the variables. Inflation has a negative and significant impact on economic growth while international arrival and tourism expenditure have a positive and significant impact on economic growth. Furthermore, to enhance tourism activities and attract foreign tourists, the government must focus on macroeconomic stability because such factors have a direct effect on tourism and thus multifaceted impact on economic growth.

An empirical asymmetric effect of the tourism-led growth hypothesis in the Chinese economy

ABSTRACTWith its ability to spur growth and jobs, tourism has become an important part of the Chinese economy. In light of this, this research empirically investigates the inconsistent effect of the tourism-led growth theory within the framework of China. This study uses an innovative method to take possible connection asymmetries into consideration. We employ both symmetric and asymmetric multivariate panel Granger causality tests to explore the causal connection between China's economic growth and international tourism revenues (ITRs). In this study, the years 1995-2019 have been investigated. The conclusions of our research are substantial. In particular, we find symmetric causation in Henan, where there is a notable and statistically significant one-way Granger causality link between ITRs and real gross domestic product (RGDP). In contrast, our study shows that there is a substantial one-way Granger causation link between ITRs and RGDP in Hunan. These findings have important ramifications and offer some evidence in favor of the hidden tourism-led growth theory. More precisely, our results are in line with the hypothesis in Heilongjiang, Henan, Hubei and Jiangxi. In summary, this research advances knowledge of the tourism-led growth theory pertaining to the Chinese economy. The presence of asymmetric effects underscores the importance of tailoring policy responses to specific economic conditions and contexts. Our findings provide valuable guidance for policymakers and industry stakeholders seeking to harness the full potential of tourism as an engine of economic growth in China.

Modelling of nonlinear asymmetric effects of changes in tourism on economic growth in an autonomous small-island economy

Abstract While a substantial body of empirical evidence exists supporting the tourism-led growth hypothesis, more limited evidence exists regarding the dynamics of the relationship between tourism and economic growth in the island context, with important questions remaining to be answered regarding the linearity and symmetry of the relationship. Policymakers would benefit greatly from such knowledge as they attempt to harness inbound tourism as an engine of economic growth. This study contributes to bridging this important gap in knowledge by investigating the dynamics of the relationship between tourism and GDP in Madeira, a small-island autonomous region of Portugal. The analysis employs an asymmetric nonlinear autoregressive distributed lag model, using data from 1976 to 2019. The results confirm unidirectional causality between tourism and GDP, thus corroborating the tourism-led growth hypothesis. The relationship is also found to be asymmetrical, where the retarding effect of falling tourism receipts is significantly stronger than the stimulus effect associated with increasing tourism receipts. Significant non-linear effects are also found in each adjustment pathway. In terms of policymaking, while this study confirms that investing in tourism can be an effective way of promoting economic growth, efforts should also be made to diversify both the tourism sector and the wider economy to reduce exposure to downside risks.

Tourism and economic development: A literature review to highlight main empirical findings

After the publication of a significant number of papers analyzing the tourism-led growth hypothesis (TLGH), a new line has arisen within the scientific literature, which attempts to analyze the capacity of tourism as an instrument of economic development, given that this concept has been widely linked to both economic aspects and socio-economic conditions of the resident population. Because of the new line mentioned, this work reviews 57 published articles (from 2005 to 2022) that examined the relationship between tourism and economic development. Specifically, the empirical results of the reviewed works suggest that tourism has positive effects on socio-economic development, acting as a tool that reduces poverty, lessens inequalities, and improves the living conditions of the resident population. In line with this, papers reviewed suggests different policy recommendations as promote access to financing, trade, campaigns for tourism or major relevance of public and private sector investments.

Yabancı turistlerin kullandığı ulaşım türleri ile ekonomik büyüme arasındaki dinamik ilişki: Türkiye Cumhuriyeti'nin son 50 yılından kanıtlarla ekonometrik bir analiz

This article aims to reveal the relationship between the Turkish economy and tourism, with a retrospective evaluation of the 100th anniversary of the Republic. In attempting to determine this relationship, the question is asked whether the tourism-led growth (TLG) hypothesis or the economy-led growth hypothesis through the expansion of tourism is valid based on the last 50 years of the republican period. The ARDL approach (Autoregressive Distributed Lag) investigates the interaction between variables. A cointegration relationship was found between the variables and a positive relationship between the tourists arriving by air and sea and economic growth in the long run. The Granger causality test was applied to determine the presence and direction of causality between tourists arriving in Turkey and GDP. The results show that economic growth is the Granger causality for tourist arrivals. Relating these results to the variables studied and the study period for the Turkish economy confirms the validity of the hypothesis of tourism expansion based on economic growth rather than the hypothesis of tourism-induced growth.

Does Social Media Moderate the Link Between Tourism and Economic Well-Being? Evidence From the Iterated Gmm Approach

The relevance of social media to tourism and, subsequently, economic well-being is demonstrable in the target marketing of tourism products and services to potential customers at tourist destinations. Using a dataset from the 40 most visited countries across different continents over the period 2009 to 2020, this study investigates the effect of tourism and social media on economic well-being. It also examines the role of social media as a moderating factor in this relationship. The study adopts the tourism-led growth hypothesis as the main theoretical rationale to explain the underlying relationship between tourism, social media, and economic well-being. The empirical analysis is conducted using the iterated generalized method of moments (GMM). The results show that tourism development helps to promote economic well-being, while social media has a dampening effect. Additionally, the findings indicate that a high level of social media penetration has a significant and positive moderating effect on the nexus between tourism and economic well-being. This suggests that social media-driven tourism can significantly improve the economic well-being of destination countries. Conducive macroeconomic conditions and political stability are also concurrent with the contributory effects of tourism on the economic well-being of destination countries.

Tourism development and economic growth: the Validity of the Tourism-Led Growth Hypothesis for Madeira

Most island´s economies, such as Madeira, are confined to maximizing opportunities in the sectors not constrained by market proximity, as in the case of tourism. Previous empirical studies have mainly applied econometric models to find and characterize the relationship between tourism development and real GDP in the long run. While a few studies fail to corroborate this relationship due to its complex nature, most studies confirm the Tourism-Led Growth Hypothesis (TLGH) that links the economic growth on islands to THE tourism sector. This paper explores the validity of the tourism-led growth hypothesis for Madeira using annual data from 1978 to 2019. The results of the cointegration tests point to a positive long-run relationship between tourism receipts and economic growth. Moreover, the analysis of the short-run dynamics, based on a VECM reveal that this long-run linear relationship is stable. However, we need to the taking into account the existence of structural breaks, and a change of regime, and therefore sources of instability. From a “causality” point of view, the main finding suggests that there is long-run causality running from tourism to GDP but not the opposite. The overall results corroborate the widespread view of the region´s over-dependence on the tourism sector

Can tourism development and economic growth mutually reinforce in small countries? Evidence from Singapore

ABSTRACT This study investigates the causal relationships between international tourism development and the economic growth of a global city–state – Singapore – drilling into the temporal details of the tourism-economy nexus in small countries. Many studies have examined whether the tourism-led growth hypothesis or the economy driven-tourism growth hypothesis holds in large developed and emerging countries. Still, relatively few studies examine small countries’ tourism-economy nexus, and the temporal details of the nexus have not been adequately examined. We examine the tourism-economy nexus in Singapore using quarterly data from 1991Q1 to 2020Q4 and the Autoregressive Distributed Lag (ARDL) Model, with the long- and short-run dynamics and the feedback loop of the nexus considered. Our statistical findings show that international tourism development leads economic growth by two quarters in Singapore. Also, there are both ‘consistent’ and ‘contemporaneous’ positive feedback loops between tourism development and economic growth, but those loops cannot last for more than a quarter. From the economic perspective, our study reveals that improving tourism activities may accelerate the post-Covid economic recovery of some small countries that rely on tourism. Yet, continuous input is required to sustain the tourism-economy synergy.

The relationship between inbound tourism and economic growth: Case of Botswana

AbstractThis study investigates the relationship between inbound tourism expansion and economic growth in Botswana, employing time series data from 1988 to 2019. An autoregressive distributed lag (ARDL) bounds tests and Toda and Yamamoto causality test were utilized for cointegration and direction of causality analyses, respectively. The study findings suggest and validate a tourism‐led growth hypothesis (TLGH) both in the long and short run. However, inbound tourism expansion has a modest impact on the country's economic growth, which causes concern and need for improvement. Therefore, the study suggests that there should be strengthening and expediting of tourism product diversification for enhanced tourism experiences and tourist spending. The tourism sector should be restructured to curb high economic and financial leakages, create strong linkages with other sectors, and adopt a mixed‐price model to promote domestic tourism and local beneficiation.

Interrelationships between Tourist Arrivals, Exchange Rate, Inflation, and Economic Growth: Empirical Evidence for Türkiye

Touristic activities have become essential for sustainable development associated with countries' prosperity and mobility opportunities. These activities may be affected by the exchange rate, economic growth, and general price movements, and these variables may also be affected by tourism activities. This study analyzes the relationships between tourist arrivals, economic growth, inflation, and exchange rate for Türkiye taking the country's geopolitical risk as exogenous, using monthly data over 2008-2020 and a Vector Error Correction modelling approach. The results indicate favorable short-run and long-run impacts of tourist arrivals on economic growth and confirm the validity of the tourism-led growth hypothesis for Türkiye. Toda Yamamoto causality tests show unidirectional causality from economic growth to inflation and exchange rate fluctuations and from the exchange rate to inflation. Therefore, results do not show evidence of tourism’s Dutch disease effect. Improving the quality of tourism-related services and marketing is vital for revenue increase and, thus, economic growth.

The moderating role of digitalisation in the tourism-growth nexus: evidence from small island economies

ABSTRACT An overwhelming amount of studies has investigated tourism as a driver of growth and there is a wide consensus on a positive relationship (tourism-led growth hypothesis). However, recent studies have also pointed out that the tourism-growth nexus may be conditional on certain elements like development level and infrastructure, education and human capital among others. Another factor which is believed to moderate the tourism-growth link is the level of digitalisation of the destination country and this research claims that countries with higher levels of digitalisation could benefit from increased tourism economic benefits. This study analyses the moderating role of such digitalisation in the tourism-growth link. The research uses annual panel data of 28 small island economies from 1990 to 2019 and applies panel autoregressive distributed lag (PARDL) methodology to analyse the long-run and short-run relationship among the variables. Results confirm the Tourism-led growth hypothesis in both the long run and short run, but more importantly point out that this relationship is moderated or is conditional by the level of digitalisation. In fact, the economic benefit of tourism is found to be higher with increased digitalisation level. Panel Granger Causality tests confirm the causal effect of digitalisation on tourism development as well as a bi-directional causality between tourism development and economic growth. The implications are clear that government and tourism businesses should accelerate the digitalisation process and concentrate on the concept of e-tourism to maximise its return.

Energy resources, tourism development and growth-emission nexus in developing countries

The primary purpose of this research is to evaluate the interrelationship between economic growth, carbon dioxide emissions, fossil fuel resource consumption, renewable energy resource consumption, and the development of the tourism industry. To this end, the panel VAR (Vector Autoregressive) approach is employed to analyze the annual data over 2000–2021 for 40 developing Asian countries. The major findings confirmed the Environmental Kuznets Curve hypothesis only for economic growth in the industry and services sectors. In addition, there are bi-directional linkages between economic growth in all three sectors and tourism development, revealing the existence of both TLGH (the Tourism-led growth hypothesis) and ELTG (Economic Lead Tourism Growth) hypotheses. Regarding the value of the growth rate of CO2 (Carbon dioxide) emissions, the growth rates of all variables in the previous period positively impact it. In contrast, the growth rate of the green energy index negatively affects the value of the growth rate of carbon emissions in the examined Asian developing economies. Developing green financing markets and promoting green culture are two recommended practical policies by this research.

Re-visiting the causal relationship between tourism and economic growth in India: specific to general modelling approach

PurposeTourism–economy relationship in India has been studied extensively in the past literature using a single equation approach. However, the present paper diverted from this trend and examined the tourism–economy relationship using the specific to general modelling approach over the 1990–2018 time period. The study also accounts for the influence of merchandise trade, capital formation, foreign investment inflows and inflation on economic growth to achieve the robustness of the coefficient estimates.Design/methodology/approachTo achieve the objective, the study utilised a specific to general modelling strategy. First, the regression equation includes only three core variables: gross domestic product (GDP), international tourist receipts and international tourist expenditures. Next, the authors include other control variables in the regression equation one by one, leading us to test five model types for investigating the cointegration among the variables. As for the estimation technique, the authors employed autoregressive distributed lag (ARDL) approach.FindingsThe paper's findings highlight that tourism receipts and expenditures exert a positively significant impact on economic growth. Moreover, including the additional independent variables does not substantially change the tourism and economic growth relationship. The existence of one-way causality from tourism expenditures to economic growth supports the tourism-led growth hypothesis. These findings highlight the rationale for intervention by the government and policymakers to promote tourism potential and facilities to accelerate the overall growth performance of the country. While the existence of one-way causal effect from economic growth to tourism revenues supports the growth-led tourism development hypothesis, implying that economic expansion is necessary for tourism development.Research limitations/implicationsThis research article tried to present a comprehensive picture of India's tourism–economy relationship. However, the present study is organised as an aggregate economy-level analysis. It assumed that the aggregate tourism sector is homogenous. However, different tourism sectors exert different levels of influence on the economy. The authors expect future research can take the disaggregated analysis of the tourism–economy relationship.Practical implicationsThis study provides valuable insights into the tourism-led growth hypothesis in India. The study highlights comprehensive intervention by the government and policymakers for accelerating tourism development to invigorate the overall growth performance of the country over the long run. The principal recommendation emerging from the present research is that the tourism growth potential can be depended upon to stimulate the economic performance of the Indian economy.Originality/valueThe present study diverted from the previous empirical studies by following a specific to general modelling strategy. First, the regression model includes only three core variables such as economic growth, tourism receipts and tourism expenditure. Next, the authors include other control variables in the regression equation one by one, leading us to test five model types for investigating the cointegrating relationship among the variables. GDP growth rate is used as a dependent variable in all five specifications. The idea is to expand the model to capture every feature of the data generating process.

The Symmetric and Asymmetric in the Nexus Tourism and Economic Development in China

To account for potential asymmetries in the relationship, this study applies new bootstrap symmetric and asymmetric multivariate panel Granger causality test to examine the causal relationship between international tourism receipts (ITRs) and economic growth in China for the period from 1995 to 2019. The result supports evidence for the symmetric causality in Henan, showing significant one-way Granger causality from ITRs to real gross domestic product (RGDP). They also indicate that Hunan has significant one-way Granger causality from RGDP to ITRs. These results denote that the hidden tourism-led growth hypothesis is valid in Heilongjiang, Henan, Hubei and Jiangxi.

The relevance of international tourism and natural resource rents in economic growth: Fresh evidence from MINT countries in the digital era.

The Mexico, Indonesia, Nigeria, and Turkey (MINT) economies are recognized to be bedevilled with many obstacles hampering the economic expansion. In the meantime, many of these problems have not been comprehensively scrutinized in the context of the countries. In recent years, natural resources and tourism development have significantly increased in MINT economies. This study scrutinizes the relationship between natural resource rent, mobile use, foreign direct investment, international tourism, and economic growth in a balanced panel data of four MINT nations from 1971 to 2019. The key finding of this study shows that there is a positive and significant impact of foreign direct investment, natural resource rent, mobile use, and international tourism on MINT's economic growth. Furthermore, the tourism-led growth hypothesis is supported empirically in the case of MINT nations. Furthermore, the Granger causality analysis demonstrates that unidirectional causality is discovered from economic growth to tourism. The study recommends that MINT nations implement some practical tourism strategies to push up economic development, and in turn economic growth will positively contribute to the tourism sector.

Is tourism an accelerator of economic growth? Evidence from South Asian region

AbstractThe present study aims to investigate the impact of tourism on the economic growth of the South Asian region. By employing panel data of six South Asian economies spanning from 1998 to 2017, our empirical investigation relies upon the panel cointegration and Fully Modified Ordinary Least Squares (FMOLS) techniques. Consistent with the “Tourism Led Growth Hypothesis”, the results prove a significant positive and long-run association between tourism and economic growth. The novelty of our study is the presentation of two models which confirm that tourism is an independent accelerator of economic growth, and it performs the same role even in the presence of standard income determinants. These findings are robust when we apply alternate statistical techniques, such as, dynamic ordinary least square method and Granger Causality Test. It implies that the South Asian economies should focus on the development of the tourism sector with permanent development in public infrastructures, like public transport, airports, road system and telecommunication to surge their economic growth.

Tourism for poverty reduction in developing countries: Does it really hold for Tanzania?

ABSTRACT Despite the increase in tourism, the contribution of tourism to poverty reduction is questionable. Using secondary data with poverty index as a dependent variable, the effects of tourism value, total trade value, foreign direct investment, gross domestic product, and exchange rates were tested using econometric time series analysis for Tanzania from 1987 to 2020. The results for the long-run effects indicate all five variables significantly influence on human development as a proxy for poverty. Foreign direct investment has a negative effect, unlike the other variables. These results offer support to the Tourism Led Growth Hypothesis for a developing country like Tanzania in sub-Saharan Africa. Thus it is logical to continue promoting tourism in conjunction with the facilitation of export trade as a means of poverty reduction. Attracting foreign direct investments should continue but put into consideration policies, regulations, and the business environment that facilitate local business linkages with tourism which will reduce profit leakages.

The Dynamic Role of Financial Development in Analyzing the N-Shaped Tourism-Led Growth Hypothesis in Mauritius

This study is a critical step to explore how financial development moderates the N-shaped tourism-led growth hypothesis in Mauritius, considering the rising influence of the tourism sector on this small island but a high-income country and the dearth of recent empirical studies in this direction. Relying on annual time series between 1980 and 2018, the study employed the ARDL model and the quantile ARDL model, a technique rarely applied in extant studies to analyze the possible nonlinear (N-shaped) dynamics of tourism and the moderating role of financial development on productivity in Mauritius. The various cointegration tests proved that the series have a common long-run trend, whereas the causality test validates the tourism-led growth hypothesis. The ARDL estimates reveal positive and significant impacts from tourism and financial development on economic growth, against the negative and insignificant effects of the other control variables in the long and short run. However, from the QARDL, the impacts of tourism and financial development on growth remained predominantly negative in the long term at all quantiles of economic growth except at q0.30, where a positive impact was recorded from tourism. However, in the short run, the contributions of tourism and financial development remained positive but insignificant across the distributions of economic growth, therefore buttressing the time-varying (N-shaped) nature of the relationship. By implication, policies that could shield the economy from shocks arising from business cycles and sustain the positive/significant contributions of tourism and financial system to economic growth are pertinent to boost the confidence of all stakeholders.

Spatial effects of tourism development on economic resilience: an empirical study of Wenchuan earthquake based on dynamic spatial Durbin model

This study highlights the importance of the effects of spatial tourism. Using panel data of 135 Wenchuan earthquake-affected counties from 2008 to 2018, this study employs the dynamic spatial Durbin model to examine the spatial effects of tourism development on post-disaster economic resilience and compares the differences in the tourism-growth nexus between severe disaster-affected counties and general disaster-affected counties. The empirical results show that tourism development contributes to economic resilience for general disaster-affected counties, which supports the tourism-led growth hypothesis, whereas there is an inverted U-shaped relationship for severely disaster-affected counties. Furthermore, the spatial spillover effects of tourism are insignificant. Plausible explanations for these results are discussed, and policy suggestions are provided.