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Determinants of international tourism: a three-dimensional panel data analysis

  • Yair Eilat
  • Liran Einav
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    International tourism is a fast growing industry generating half a trillion dollars in annual revenues and accounting for almost 10% of total international trade, and almost half of total trade in services. Yet, it has so far failed to receive the attention it deserves from mainstream economics. This paper attempts to provide an initial understanding of the determinants of international tourism. This paper claims that international tourism, as other forms of trade in services, is driven by unique factors of production, and may be better dealt with in a single industry study rather than in a general equilibrium trade model. In order to understand these determinants the world is viewed as a market of differentiated products, and a discrete choice estimation technique is applied to a large three-dimensional data set of tourist flows. It is shown that a relatively simple estimation technique, combined with a rich data set, can deliver reasonable substitution patterns. It is found, among other things, that political risk is very important for tourism, and that exchange rates matter mainly for tourism to developed countries. These have exchange rate elasticity of about one.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/000368404000180897
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    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 36 (2004)
    Issue (Month): 12 ()
    Pages: 1315-1327

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    Handle: RePEc:taf:applec:v:36:y:2004:i:12:p:1315-1327
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    1. Edward E. Leamer & James Levinsohn, 1994. "International Trade Theory: The Evidence," NBER Working Papers 4940, National Bureau of Economic Research, Inc.
    2. Witt, Stephen F. & Witt, Christine A., 1995. "Forecasting tourism demand: A review of empirical research," International Journal of Forecasting, Elsevier, vol. 11(3), pages 447-475, September.
    3. Berry, Steven & Levinsohn, James & Pakes, Ariel, 1995. "Automobile Prices in Market Equilibrium," Econometrica, Econometric Society, vol. 63(4), pages 841-90, July.
    4. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
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