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

Author

Listed:
  • Chia-Lin Chang

    (Department of Applied Economics and Department of Finance, National Chung Hsing University, 250 Kuo-Kuang Road, Taichung, Taiwan 402, ROC)

  • Thanchanok Khamkaew

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

  • Michael McAleer

    (Econometric Institute, Erasmus School of Economics, Erasmus University Rotterdam, and Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University, Japan)

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 paper investigates whether tourism specialization was 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 alter with changes in the threshold variables. The empirical results suggest that tourism growth does not always lead to substantial economic growth.

Suggested Citation

  • Chia-Lin Chang & Thanchanok Khamkaew & Michael McAleer, 2012. "IV Estimation of a Panel Threshold Model of Tourism Specialization and Economic Development," Tourism Economics, , vol. 18(1), pages 5-41, February.
    • Handle: RePEc:sae:toueco:v:18:y:2012:i:1:p:5-41
    DOI: 10.5367/te.2012.0108
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    More about this item

    Keywords

    economic development; tourism specialization; threshold regression; instrumental variables; panel data; cross-sectional data;
    All these keywords.

    JEL classification:

    • 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
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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