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

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  • Chia-Lin Chang

    (Department of Applied Economics, National Chung Hsing University)

  • Thanchanok Khamkaew

    (Faculty of Economics, Chiang Mai University and Faculty of Economics, Maejo University)

  • Michael McAleer

    (Erasmus School of Economics, Erasmus University Rotterdam and Tinbergen Institute)

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 purpose of this paper is to investigate 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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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-732.

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Length: 50pages
Date of creation: Apr 2010
Date of revision:
Handle: RePEc:tky:fseres:2010cf732

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  1. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment Updates and Implications," NBER Working Papers 7911, National Bureau of Economic Research, Inc.
  2. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
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  5. repec:ebl:ecbull:v:3:y:2008:i:21:p:1-8 is not listed on IDEAS
  6. 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.
  7. John M. Piotrowski & Rabah Arezki & Reda Cherif, 2009. "Tourism Specialization and Economic Development+L4183," IMF Working Papers 09/176, International Monetary Fund.
  8. 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.
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  13. 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.
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Cited by:
  1. 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.
  2. Chia-Lin Chang & Hui-Kuang Hsu & Michael McAleer, 2013. "The Impact of China on Stock Returns and Volatility in the Taiwan Tourism Industry," Working Papers in Economics 13/27, University of Canterbury, Department of Economics and Finance.
  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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