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Tourism, Capital Good Imports and Economic Growth: Theory and Evidence for Spain

Author

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  • Jean-Jacques Nowak

    (Faculté de sciences économiques et sociales - EQUIPPE, Université de Lille I, 59655 Villeneuve d'Ascq, France)

  • Mondher Sahli

    (Victoria University of Wellington - VMS, PO Box 600, Wellington, New Zealand)

  • Isabel Cortés-Jiménez

    (Christel DeHaan Tourism and Travel Research Institute, Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham NG8 1BB, UK)

Abstract

Exports are generally assumed to promote long-term growth through two main channels. The first, known as the export-led growth (ELG) hypothesis, is by enhancing economy-wide efficiency. This mechanism has recently been applied to tourism services exports (the tourism -led growth, TLG, hypothesis). The second channel is the financing of imports of foreign capital goods, thus raising the level of capital formation. Although this channel turns out to be empirically important, no theoretical rigorous foundation has yet been provided. Moreover, it has never been investigated for tourism exports. This paper fills two gaps. On the theoretical side, it provides a clear justification of the role of capital good imports in the link between exports and overall economic growth. A model has been built to examine this so-called EKIG hypothesis (exports → capital good imports → growth) in which sustained economic growth is achieved by imports of foreign capital entirely financed through inbound tourism. This model highlights a mechanism of international transmission of economic growth from the tourist-generating country (the tourism services importer) to the tourist-receiving economy (the tourism services exporter) through trade and terms-of-trade movement without any technological progress, research and development (R&D) activity or accumulation of human capital in the host economy. On the empirical side, this study constitutes the first attempt to examine the role of tourism exports on economic growth through capital good imports. The authors use Johansen's cointegration approach and the multivariate Granger causality test to analyse the TKIG (tourism → capital good imports → growth) hypothesis in the Spanish economy.

Suggested Citation

  • Jean-Jacques Nowak & Mondher Sahli & Isabel Cortés-Jiménez, 2007. "Tourism, Capital Good Imports and Economic Growth: Theory and Evidence for Spain," Tourism Economics, , vol. 13(4), pages 515-536, December.
  • Handle: RePEc:sae:toueco:v:13:y:2007:i:4:p:515-536
    DOI: 10.5367/000000007782696113
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    References listed on IDEAS

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