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Domestic tourism demand in Italy: a Fixed Effect Vector Decomposition estimation

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  • Massidda, Carla
  • Etzo, Ivan

Abstract

This study investigates the main determinants of the Italian domestic tourism demand measured in terms of regional bilateral tourism flows. We consider a large panel of explanatory variables meant to capture not only the role of traditional economic demand-driven forces, but also qualitative supply-side factors that can be crucial in determining the comparative advantage of the exporting regions. The empirical analysis, performed in the context of an extended gravity model, builds on the Fixed Effect Vector Decomposition estimator (FEVD) developed by Plümper and Troeger (2007). The investigation is conducted for the country as a whole and separately for the two macro-areas, namely the Centre-North and the South. According to our results, at aggregate level, the main determinants of Italian tourism flows appear to be the lagged dependent variable, which control for reputation and habit formation, and relative prices. Also the per capita GDP plays a significant role, but its coefficient suggests that in Italy domestic tourism does not behave as a luxury good, as frequently found in the international tourism context. Another interesting result is that for Italian tourists, domestic destinations and international destinations act as substitutable goods. At sub-sample level two main findings are worth noting. On the one hand, the main outcomes of the full sample analysis are confirmed, on the other hand some interesting differences arise with respect to the impact of the relevant variables. In particular, tourists coming from the southern regions appear to be more concerned than northern ones about variations in their per capita GDP and in price differences.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 26073.

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Date of creation: Jul 2010
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Handle: RePEc:pra:mprapa:26073

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Keywords: Domestic tourism flows; Gravity model; Fixed Effect Vector Decomposition;

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  1. Nijkamp, P. & Abreu, M., 2009. "Regional development theory," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0029, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  2. Cornwell, Christopher & Rupert, Peter, 1988. "Efficient Estimation with Panel Data: An Empirical Comparison of Instrumental Variables Estimators," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 3(2), pages 149-55, April.
  3. Hsiao,Cheng, 2003. "Analysis of Panel Data," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521522717.
  4. Santeramo, Fabio G. & Seccia, Antonio & De Blasi, Giuseppe & Carlucci, Domenico, 2008. "Agritourism flows to Italy: an analysis of determinants using the gravity model approach," 107th Seminar, January 30-February 1, 2008, Sevilla, Spain, European Association of Agricultural Economists 6623, European Association of Agricultural Economists.
  5. Naudé, Wim & Saayman, Andrea, 2005. "Determinants of tourist arrivals in Africa: a panel data regression analysis," MPRA Paper 16479, University Library of Munich, Germany.
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