The Impact of Wage Rate Growth on Tourism Competitiveness in Transitional Countries
Kahlil S. Philander
University of Nevada, Las Vegas; Responsible Gambling Council
University of Nevada, Las Vegas
August 1, 2011
This study tests whether national labor costs affect international competitiveness in the tourism industry. Labor costs are often cited as a measure of manufacturing competitiveness, but no extensions have been made to examine whether national wage growth affects tourism expenditures. Using a fixed effect model design and two-stage least squares estimation, the study controls for potential endogeneity by implementing education as an instrument for gross wages. The study revealed that labor costs may be an important supply side determinant of tourism expenditures, and supported the theory of a negative relationship between these two variables. The reported findings have government macroeconomic policy implications and industrial implications. Potential extensions of these findings to the tourism area life cycle model are discussed.
Keywords: tourism, wages, labor costs, instrumental variable, income
JEL Classification: L83, J30working papers series
Date posted: August 31, 2011 ; Last revised: November 4, 2011
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