Tourism and Economic Growth in Latin American Countries: A Panel Data Approach
Juan Luis Eugenio-Martin
University of Las Palmas de Gran Canaria - Analisis Economico Aplicado
Noelia Martín Morales
Universidad de Las Palmas de Gran Canaria - Facultad de Ciencias Económicas y Empresariales - Dept. de Análisis Económico Aplicado
University of Waikato - Management School
FEEM Working Paper No. 26.2004
We consider the relationship between tourism and economic growth for Latin American countries since 1985 until 1998. The analysis proposed is based on a panel data approach and the Arellano-Bond estimator for dynamic panels. We obtain estimates of the relationship between economic growth and growth in tourists per capita conditional on main macroeconomic variables. We show that the tourism sector is adequate for the economic growth of medium or low-income countries, though not necessarily for developed countries. We then invert the causality direction of the analysis. Rather than explaining economic growth, we try to explain tourism arrivals conditional on GDP and other covariates such as safety, prices and education level, and investment in infrastructures. We employ a generalised least squares AR(1) panel data model. The results provide evidence that low-income countries seem to need adequate levels of infrastructures, education and development to attract tourists. Medium-income countries need high levels of social development like health services and high GDP per capita levels. Finally, the results disclose that price of the destination, in terms of exchange rate and PPP is irrelevant for tourism growth.
Number of Pages in PDF File: 28
Keywords: Tourism, Economic growth, Panel data
JEL Classification: L83, O40, C33, O54
Date posted: March 22, 2004
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