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Tourism and Growth in European Countries: Model Specification and Panel Data Analysis

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  • Felipa de Mello-Sampayo
  • Sofia de Sousa-Vale

Abstract

This paper applies likelihood-based panel cointegration techniques to examine the existence of a long run relationship between GDP, tourism earnings per tourist and total trade volume for a panel of European countries over the period 1988–2010. Removing the cross dependency, our panel tourism-led growth model indicates that tourism development has a higher impact on GDP in the North than in South European countries. Furthermore, the volume of trade shows a significant and much stronger effect on the long run economic growth in our sample economies than tourism does. The policy implication of these results is that the impact of tourism development on growth when compared to the impact of international trade while facing a budget constraint leads us to conclude that the best strategy is for countries to invest in trade rather than in tourism.

Suggested Citation

  • Felipa de Mello-Sampayo & Sofia de Sousa-Vale, 2011. "Tourism and Growth in European Countries: Model Specification and Panel Data Analysis," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 57(4), pages 303-324.
  • Handle: RePEc:aeq:aeqaeq:v57_y2011_i4_q4_p_303-324
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    File URL: http://dx.doi.org/10.3790/aeq.57.4.303
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    More about this item

    Keywords

    Tourism; Economic growth; Rank tests; Panel unit root tests; Panel cointegration;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L83 - Industrial Organization - - Industry Studies: Services - - - Sports; Gambling; Restaurants; Recreation; Tourism

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