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IV Estimation of a Panel Threshold Model of Tourism Specialization and Economic Development

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Author Info

  • Chia-Lin Chang

    (Department of Applied Economics, National Chung Hsing University)

  • Thanchanok Khamkaew

    (Faculty of Economics, Chiang Mai University)

  • Michael McAleer

    (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University)

Abstract

The significant impact of international tourism in stimulating economic growth is especially important from a policy perspective. For this reason, the relationship between international tourism and economic growth would seem to be an interesting and topical empirical issue. The paper investigates whether tourism specialization is important for economic development in 159 countries over the period 1989-2008. The results from panel threshold regressions show a positive relationship between economic growth and tourism. Instrumental variable estimation of a threshold regression is used to quantify the contributions of tourism specialization to economic growth, while correcting for endogeneity between the regressors and error term. The significant impact of tourism specialization on economic growth in most regressions is robust to different specifications of tourism specialization, as well as to differences in real GDP measurement. However, the coefficients of the tourism specialization variables in the two regimes are significantly different, with a higher impact of tourism on economic growth found in the low regime. These findings do not change with changes in the threshold variables. The empirical results suggest that tourism growth does not always lead to substantial economic growth.

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Bibliographic Info

Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 708.

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Length: 42pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:kyo:wpaper:708

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Keywords: International tourism; economic development; tourism specialization; threshold regression; instrumental variables; panel data; cross-sectional data.;

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  1. John M. Piotrowski & Rabah Arezki & Reda Cherif, 2009. "Tourism Specialization and Economic Development+L4183," IMF Working Papers 09/176, International Monetary Fund.
  2. Arezki, Rabah & Cherif, Reda & Piotrowski, John, 2009. "Tourism Specialization and Economic Development: Evidence from the UNESCO World Heritage List," MPRA Paper 17132, University Library of Munich, Germany.
  3. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  4. Francesco Pigliaru & Alessandro Lanza, 2003. "How fast are the tourism countries growing? The international evidence, 1980-95," ERSA conference papers ersa03p234, European Regional Science Association.
  5. Juan Luis Eugenio-Martín & Noelia Martín Morales & Riccardo Scarpa, 2004. "Tourism and Economic Growth in Latin American Countries: A Panel Data Approach," Working Papers 2004.26, Fondazione Eni Enrico Mattei.
  6. R. Brau & A. Lanza & F. Pigliaru, 2006. "How fast are small tourist countries growing? The 1980-2003 evidence," Working Paper CRENoS 200614, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  7. Caner, Mehmet & Hansen, Bruce E., 2004. "Instrumental Variable Estimation Of A Threshold Model," Econometric Theory, Cambridge University Press, vol. 20(05), pages 813-843, October.
  8. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  9. Adamos Adamou & Sofronis Clerides, 2009. "Prospects and Limits of Tourism-Led Growth: The International Evidence," Working Paper Series 41_09, The Rimini Centre for Economic Analysis, revised Jan 2009.
  10. Edgar J Sanchez Carrera & W. Adrian Risso & Juan Gabriel Brida, 2008. "Tourism's Impact on Long-Run Mexican Economic Growth," Economics Bulletin, AccessEcon, vol. 3(21), pages 1-8.
  11. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, December.
  12. Jacint Balaguer & Manuel Cantavella-Jorda, 2002. "Tourism as a long-run economic growth factor: the Spanish case," Applied Economics, Taylor & Francis Journals, vol. 34(7), pages 877-884.
  13. repec:ebl:ecbull:v:3:y:2008:i:21:p:1-8 is not listed on IDEAS
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Cited by:
  1. Chang, C-L. & Hsu, H-K. & McAleer, M.J., 2013. "The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry," Econometric Institute Research Papers EI 2013-26, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  2. Ronald Kumar, 2014. "Exploring the nexus between tourism, remittances and growth in Kenya," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1573-1588, May.
  3. Chang, Chia-Lin & Hsu, Hui-Kuang, 2013. "Modelling Volatility Size Effects for Firm Performance: The Impact of Chinese Tourists to Taiwan," MPRA Paper 45691, University Library of Munich, Germany.

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