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

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 purpose of this paper is to investigate whether tourism specialization is 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 change with changes in the threshold variables. The empirical results suggest that tourism growth does not always lead to substantial economic growth.

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File URL: http://www.econ.canterbury.ac.nz/RePEc/cbt/econwp/1013.pdf
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Paper provided by University of Canterbury, Department of Economics and Finance in its series Working Papers in Economics with number 10/13.

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Length: 49 pages
Date of creation: 01 Apr 2010
Date of revision:
Handle: RePEc:cbt:econwp:10/13
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  1. Robert J. Barro & Jong-Wha Lee, 2000. "International Data on Educational Attainment: Updates and Implications," CID Working Papers 42, Center for International Development at Harvard University.
  2. Arezki, Rabah & Cherif, Reda & Piotrowski, John, 2009. "Tourism Specialization and Economic Development: Evidence from the UNESCO World Heritage List," MPRA Paper 17132, University Library of Munich, Germany.
  3. Robert J. Barro & Xavier Sala-i-Martin, 2003. "Economic Growth, 2nd Edition," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262025531, June.
  4. Adamos Adamou & Sofronis Clerides, 2010. "Prospects and Limits of Tourism-Led Growth: The International Evidence," Review of Economic Analysis, Rimini Centre for Economic Analysis, vol. 2(3), pages 287-303, September.
  5. Juan Luis Eugenio-Martín & Noelia Martín Morales & Riccardo Scarpa, 2004. "Tourism and Economic Growth in Latin American Countries: A Panel Data Approach," Working Papers 2004.26, Fondazione Eni Enrico Mattei.
  6. repec:ebl:ecbull:v:3:y:2008:i:21:p:1-8 is not listed on IDEAS
  7. Robert J. Barro, 1989. "Economic Growth in a Cross Section of Countries," NBER Working Papers 3120, National Bureau of Economic Research, Inc.
  8. Francesco Pigliaru & Rinaldo Brau & Alessandro Lanza, 2007. "How Fast are Small Tourist Countries Growing? The 1980-2003 Evidence," Working Papers 2007.1, Fondazione Eni Enrico Mattei.
  9. Edgar J Sanchez Carrera & W. Adrian Risso & Juan Gabriel Brida, 2008. "Tourism's Impact on Long-Run Mexican Economic Growth," Economics Bulletin, AccessEcon, vol. 3(21), pages 1-8.
  10. Jacint Balaguer & Manuel Cantavella-Jordá, 2000. "Tourism As A Long-Run Economic Growth Factor: The Spanish Case," Working Papers. Serie EC 2000-10, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  11. Caner, Mehmet & Hansen, Bruce E., 2004. "Instrumental Variable Estimation Of A Threshold Model," Econometric Theory, Cambridge University Press, vol. 20(05), pages 813-843, October.
  12. John M. Piotrowski & Rabah Arezki & Reda Cherif, 2009. "Tourism Specialization and Economic Development+L4183: Evidence from the UNESCO World Heritage List," IMF Working Papers 09/176, International Monetary Fund.
  13. Francesco Pigliaru & Alessandro Lanza, 2003. "How fast are the tourism countries growing? The international evidence, 1980-95," ERSA conference papers ersa03p234, European Regional Science Association.
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