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Tourism development and economic growth–a nonlinear approach

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  • Po, Wan-Chen
  • Huang, Bwo-Nung

Abstract

We use cross sectional data (1995–2005 yearly averages) for 88 countries to investigate the nonlinear relationship between tourism development and economic growth when a threshold variable is used. The degree of tourism specialization (qi, defined as receipts from international tourism as a percentage of GDP) is used as the threshold variable. The results of the tests for nonlinearity indicate that the 88 countries’ data should be separated into three different groups or regimes to analyze the tourism-growth nexus. The results of the threshold regression show that when the qi is below 4.0488% (regime 1, 57 countries) or above 4.7337% (regime 3, 23 countries), there exists a significantly positive relationship between tourism growth and economic growth. However, when the qi is above 4.0488% and below 4.7337% (regime 2, 8 countries), we are unable to find evidence of such a significant relationship. Further in-depth analysis reveals that relatively low ratios of the value added of the service industry to GDP, and the forested area per country area are able to explain why we are unable to find a significant relationship between these two variables in regime 2’s countries.

Suggested Citation

  • Po, Wan-Chen & Huang, Bwo-Nung, 2008. "Tourism development and economic growth–a nonlinear approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(22), pages 5535-5542.
  • Handle: RePEc:eee:phsmap:v:387:y:2008:i:22:p:5535-5542 DOI: 10.1016/j.physa.2008.05.037
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    Cited by:

    1. Salahodjaev, Raufhon & Safarova, Nilufar, 2015. "Do foreign visitors reward post-communist countries? A panel evidence for tourism-growth nexus," MPRA Paper 66215, University Library of Munich, Germany.
    2. Jalil, Abdul & Mahmood, Tahir & Idrees, Muhammad, 2013. "Tourism–growth nexus in Pakistan: Evidence from ARDL bounds tests," Economic Modelling, Elsevier, vol. 35(C), pages 185-191.
    3. Juan Gabriel Brida & Bibiana Lanzilotta & Fiorella Pizzolon, 2016. "Dynamic relationship between tourism and economic growth in MERCOSUR countries: a nonlinear approach based on asymmetric time series models," Economics Bulletin, AccessEcon, vol. 36(2), pages 879-894.
    4. Brida, Juan Gabriel & Pereyra, Juan Sebastián & Such, María Jesús & Pulina, Manuela, 2011. "Causalidad entre turismo y crecimiento económico de largo plazo: una revisión crítica de la literatura econométrica
      [Causality between tourism and long-term economic growth: a critical review of th
      ," MPRA Paper 37332, University Library of Munich, Germany, revised 2011.
    5. Lingaraj MALLICK & Ummalla MALLESH & Jaganath BEHERA, 2016. "Does tourism affect economic growth in Indian states? Evidence from panel ARDL model," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(1(606), S), pages 183-194, Spring.
    6. Antonakakis, Nikolaos & Dragouni, Mina & Filis, George, 2015. "How strong is the linkage between tourism and economic growth in Europe?," Economic Modelling, Elsevier, vol. 44(C), pages 142-155.
    7. Andrew Phiri, 2016. "Tourism and Economic Growth in South Africa: Evidence from Linear and Nonlinear Cointegration Frameworks," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 14(1 (Spring), pages 31-53.
    8. repec:eee:touman:v:57:y:2016:i:c:p:84-90 is not listed on IDEAS
    9. repec:eee:anture:v:66:y:2017:i:c:p:74-94 is not listed on IDEAS
    10. Shahzad, Syed Jawad Hussain & Shahbaz, Muhammad & Ferrer, Román & Kumar, Ronald Ravinesh, 2017. "Tourism-led growth hypothesis in the top ten tourist destinations: New evidence using the quantile-on-quantile approach," Tourism Management, Elsevier, vol. 60(C), pages 223-232.
    11. Narayan, Paresh Kumar & Sharma, Susan Sunila & Bannigidadmath, Deepa, 2013. "Does tourism predict macroeconomic performance in Pacific Island countries?," Economic Modelling, Elsevier, pages 780-786.
    12. Hanafiah Harvey & Fumitaka Furuoka & Qaiser Munir, 2013. "The role of tourism and exchange rate on economic growth:Evidence from the BIMP-EAGA countries," Economics Bulletin, AccessEcon, vol. 33(4), pages 2756-2762.
    13. Abdulkarim K. Alhowaish, 2016. "Is Tourism Development a Sustainable Economic Growth Strategy in the Long Run? Evidence from GCC Countries," Sustainability, MDPI, Open Access Journal, vol. 8(7), pages 1-10, June.
    14. repec:eee:touman:v:42:y:2014:i:c:p:207-212 is not listed on IDEAS
    15. Chor Foon Tang & Salah Abosedra, 2016. "Tourism and growth in Lebanon: new evidence from bootstrap simulation and rolling causality approaches," Empirical Economics, Springer, vol. 50(2), pages 679-696, March.
    16. Wu, Po-Chin & Liu, Shiao-Yen & Hsiao, Juei-Ming & Huang, Tsai-Yuan, 2016. "Nonlinear and time-varying growth-tourism causality," Annals of Tourism Research, Elsevier, vol. 59(C), pages 45-59.
    17. repec:spr:qualqt:v:51:y:2017:i:4:d:10.1007_s11135-016-0362-x is not listed on IDEAS

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