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

  • Chia-Lin Chang

    (Department of Applied Economics, National Chung Hsing University)

  • Thanchanok Khamkaew

    (Faculty of Economics, Chiang Mai University)

  • Michael McAleer

    (Erasmus University Rotterdam, Tinbergen Institute, The Netherlands, and Institute of Economic Research, Kyoto University)

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 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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Paper provided by Kyoto University, Institute of Economic Research in its series KIER Working Papers with number 708.

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Length: 42pages
Date of creation: Aug 2010
Date of revision:
Handle: RePEc:kyo:wpaper:708
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  1. Adamos Adamou & Sofronis Clerides, 2009. "Prospects and Limits of Tourism-Led Growth: The International Evidence," Working Paper Series 41_09, The Rimini Centre for Economic Analysis, revised Jan 2009.
  2. 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.
  3. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
  4. Jacint Balaguer & Manuel Cantavella-Jorda, 2002. "Tourism as a long-run economic growth factor: the Spanish case," Applied Economics, Taylor & Francis Journals, vol. 34(7), pages 877-884.
  5. John M. Piotrowski & Rabah Arezki & Reda Cherif, 2009. "Tourism Specialization and Economic Development: Evidence from the UNESCO World Heritage List," IMF Working Papers 09/176, International Monetary Fund.
  6. repec:ebl:ecbull:v:3:y:2008:i:21:p:1-8 is not listed on IDEAS
  7. 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.
  8. 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.
  9. R. Brau & A. Lanza & F. Pigliaru, 2006. "How fast are small tourist countries growing? The 1980-2003 evidence," Working Paper CRENoS 200614, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  10. 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.
  11. 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.
  12. 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.
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