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A Panel Threshold Model of Tourism Specialization and Economic Development

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  • Chang, C-L.
  • Khamkaew, T.
  • McAleer, M.J.

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 empirical issue. In particular, if there is a causal link between international tourism demand and economic growth, then appropriate policy implications may be developed. The purpose of this paper is to investigate whether tourism specialization is important for economic development in East Asia and the Pacific, Europe and Central Asia, Latin America and the Caribbean, the Middle East and North Africa, North America, South Asia, and Sub-Saharan Africa, over the period 1991-2008. The impact of the degree of tourism specialization, which is incorporated as a threshold variable, on economic growth is examined for a wide range of countries at different stages of economic development. The empirical results from threshold estimation identify two endogenous cut-off points, namely 14.97% and 17.50%. This indicates that the entire sample should be divided into three regimes. The results from panel threshold regression show that there exists a positive and significant relationship between economic growth and tourism in two regimes, the regime with the degree of tourism specialization lower than 14.97% (regime 1) and the regime with the degree of tourism specialization between 14.97% and 17.50% (regime 2). However, the magnitudes of the impact of tourism on economic growth in those two regimes are not the same, with the higher impact being found in regime 2. An insignificant relationship between economic growth and tourism is found in regime 3, in which the degree of tourism specialization is greater than 17.50%. The empirical results suggest that tourism growth does not always lead to economic growth.

Suggested Citation

  • Chang, C-L. & Khamkaew, T. & McAleer, M.J., 2009. "A Panel Threshold Model of Tourism Specialization and Economic Development," Econometric Institute Research Papers EI 2009-40, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
  • Handle: RePEc:ems:eureir:17310
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    Cited by:

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    3. Seda Karagozzeren, 2018. "A Determination of number of arriving tourists and night spent in accommodation relations with economic growth: The case of Turkey," Prizren Social Science Journal, SHIKS, vol. 2(2), pages 210-224, December.
    4. Balsalobre-Lorente, Daniel & Driha, Oana M. & Sinha, Avik, 2020. "The dynamic effects of globalization process in analysing N-shaped tourism led growth hypothesis," MPRA Paper 100078, University Library of Munich, Germany.
    5. Ronald Kumar, 2014. "Exploring the nexus between tourism, remittances and growth in Kenya," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(3), pages 1573-1588, May.
    6. 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.
    7. Aistov, Andrey & Nikolaeva, Tatiana, 2019. "Tourism-led growth hypothesis," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 56, pages 5-24.
    8. Chang, Chia-Lin & Hsu, Hui-Kuang & McAleer, Michael, 2014. "The impact of China on stock returns and volatility in the Taiwan tourism industry," The North American Journal of Economics and Finance, Elsevier, vol. 29(C), pages 381-401.
    9. Antonakakis, Nikolaos & Dragouni, Mina & Eeckels, Bruno & Filis, George, 2016. "Tourism and economic growth: Does democracy matter?," Annals of Tourism Research, Elsevier, vol. 61(C), pages 258-264.
    10. Mahalia Jackman, 2014. "Output Volatility and Tourism Specialization in Small Island Developing States," Tourism Economics, , vol. 20(3), pages 527-544, June.
    11. Taha Chaiechi & Josephine Pryce & Abhishek Bhati, 2015. "Research Note: Macroeconomic Impacts of the Tourism Industry and the Contemporaneous Feedback Effect — An Australian Case Study," Tourism Economics, , vol. 21(3), pages 685-696, June.
    12. Suhel & Abdul Bashir, 2018. "The role of tourism toward economic growth in the local economy," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 10(1), pages 32-39, April.
    13. Younesse El Menyari, 2017. "International tourism and long-term economic growth: Analysis by heterogeneous dynamic panel data," Tourism Research Institute, Journal of Tourism Research, vol. 18(1), pages 134-147, November.
    14. Jun Zhang & Li Cheng, 2019. "Threshold Effect of Tourism Development on Economic Growth Following a Disaster Shock: Evidence from the Wenchuan Earthquake, P.R. China," Sustainability, MDPI, vol. 11(2), pages 1-22, January.
    15. Victor Moutinho, 2015. "Is there Convergence and Causality between the Drivers of Energy-Related Carbon Dioxide Emissions among the Portuguese Tourism Industry?," International Journal of Energy Economics and Policy, Econjournals, vol. 5(3), pages 828-840.
    16. Ronald Kumar & Nanthakumar Loganathan & Arvind Patel & Radika Kumar, 2015. "Nexus between tourism earnings and economic growth: a study of Malaysia," Quality & Quantity: International Journal of Methodology, Springer, vol. 49(3), pages 1101-1120, May.
    17. Wu, Rongxin & Lin, Boqiang, 2021. "Does industrial agglomeration improve effective energy service: An empirical study of China’s iron and steel industry," Applied Energy, Elsevier, vol. 295(C).
    18. Ronald Kumar, 2014. "Exploring the role of technology, tourism and financial development: an empirical study of Vietnam," Quality & Quantity: International Journal of Methodology, Springer, vol. 48(5), pages 2881-2898, September.
    19. Shahbaz, Muhammad & Kumar, Ronald Ravinesh & Ivanov, Stanislav & Loganathan, Nanthakumar, 2015. "Nexus between Tourism demand and output per capita with relative importance of trade and financial development: A study of Malaysia," MPRA Paper 67226, University Library of Munich, Germany, revised 11 Oct 2015.
    20. Célia M.Q. Ramos & Paulo M.M. Rodrigues, 2013. "Research Note: The Importance of Online Tourism Demand," Tourism Economics, , vol. 19(6), pages 1443-1447, December.
    21. Ronald Ravinesh Kumar & Peter Josef Stauvermann & Nikeel Kumar & Syed Jawad Hussain Shahzad, 2019. "Exploring the effect of ICT and tourism on economic growth: a study of Israel," Economic Change and Restructuring, Springer, vol. 52(3), pages 221-254, August.
    22. Antonakakis, Nikos & Dragouni, Mina & Eeckels, Bruno & Filis, George, 2015. "Tourism and economic growth revisited: Empirical evidence from a Panel VAR approach," MPRA Paper 67419, University Library of Munich, Germany.

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    More about this item

    Keywords

    economic development; international tourism; panel data; threshold variable; tourism specialization;
    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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