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The threshold effect of tourism economy development on the relationship between FDI and SIDS’ inclusive growth

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  • Juan Wang
  • Kexin Wang
  • Xuanwen Ding

Abstract

Overseas investment and tourism economy development play important roles in the inclusive growth of small island developing states (SIDS). Taking the level of tourism economy growth as a threshold, this study explores the relationship between China’s FDI to 29 SIDS and SIDS’ inclusive growth from 2005 to 2020. This connection is investigated via the entropy method, a panel autoregressive model, and a panel threshold regression model and data from the World Bank and the Ministry of Commerce of China. Several findings emerge: (1) SIDS’ inclusive growth index demonstrated an upward trend, with PROFIT-type SIDS’ inclusive growth being highest; (2) China’s FDI to SIDS could effectively promote SIDS’ inclusive growth; and (3) tourism economic growth had a threshold effect and region–type heterogeneity within the process of FDI and SIDS’ inclusive growth. The positive impact of China’s FDI on SIDS’ inclusive growth rose by 42.308% when SIDS’ tourism receipts (% of GDP) reached 25.950%. The threshold effect was strongest in the AIMS region and was not significant in the Pacific region. A double-threshold effect applied to PROFIT-type SIDS. Additionally, the threshold effect was strongest in SITEs-type SIDS and was not significant in MIRAB-type SIDS.

Suggested Citation

  • Juan Wang & Kexin Wang & Xuanwen Ding, 2023. "The threshold effect of tourism economy development on the relationship between FDI and SIDS’ inclusive growth," Current Issues in Tourism, Taylor & Francis Journals, vol. 26(24), pages 4001-4017, December.
    • Handle: RePEc:taf:rcitxx:v:26:y:2023:i:24:p:4001-4017
    DOI: 10.1080/13683500.2022.2154198
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