Determinants of International Tourism
47 Pages Posted: 3 Jun 2014
Date Written: May 2014
The paper estimates the impact of macroeconomic supply- and demand-side determinants of tourism, one of the largest components of services exports globally, and the backbone of many smaller economies. It applies the gravity model to a large dataset comprising the full universe of bilateral tourism flows spanning over a decade. The results show that the gravity model explains tourism flows better than goods trade for equivalent specifications. The elasticity of tourism with respect to GDP of the origin (importing) country is lower than for goods trade. Tourism flows respond strongly to changes in the destination country’s real exchange rate, along both extensive (tourist arrivals) and intensive (duration of stay) margins. OECD countries generally exhibit higher elasticties with respect to economic variables (GDPs of the two economies, real exchange rate, bilateral trade) due to the larger share of business travel. Tourism to small islands is less sensitive to changes in the country’s real exchange rate, but more susceptible to the introduction/removal of direct flights.
Keywords: Tourism, OECD, Pacific Island Countries, Small states, Bilateral trade, Real effective exchange rates, Economic models, International Tourism, Gravity model, Real exchange rate, Small islands, tourist, tourists, tourist arrivals, tourism receipts, tourism flows, hotel rooms, destination country, world heritage, destination countries, tourist destinations, day visitors, number of tourists, business travel, same-day visitors, tourists per year, international tourism receipts, tourism data, tourism trade, tourism services, cruise passengers, leisure travel, tourism industry, african tourism, new hotel rooms, world travel, tourism council, tour operators, international tourist, tourism exports,
JEL Classification: F14, L83
Suggested Citation: Suggested Citation