Market Value of the Economy and Gravity: Does It Translate Tourism in African Countries?

174 Pages Posted: 14 Sep 2022

Date Written: August 29, 2022

Abstract

Income from tourism is one of the most important factor to generate revenue for a country. An extant study employs GDP as a measure of income. However, based on financial theory our study finds that market value is a better proxy for tourism income. Using macro-level data from African countries from 1995-2011, and addressing potential endogeneity, the main findings of this study indicate that the market value of the economy based on financial theory is a more appropriate proxy for measuring income from tourism countries of origin. Additionally, we show that the results also suggest that the global financial equity market index (wealth of tourism) is a significant factor that influences inbound tourism flow. Our results are supported by trade theory in particular the Gravity model. These results are particularly useful for policymakers and practitioners to be more knowledgeable about the characteristics that attract tourists to the region beyond the sun, sand and sea, and the international brand of the region. Among other factors, tourists are motivated to travel to a region because of culture and similar tastes, which strongly suggests that the travel industries in this region should further explore demand, preferences, and experiences in order to cater for this segment. This study provides an explanation for the physical and cultural distance puzzle in tourism. Thus, the current study provides important input into Egyptian, Moroccan, Tunisian and South African tourism geography that can be of considerable value to tourism stakeholders in the region.

Keywords: Market value of the economy, GDP, Gravity, Oil, Trade openness, Tourism, Africa

JEL Classification: E41, G18, G15, Z32, Z38

Suggested Citation

Khondoker, Md Rubel, Market Value of the Economy and Gravity: Does It Translate Tourism in African Countries? (August 29, 2022). Available at SSRN: https://ssrn.com/abstract=4204090 or http://dx.doi.org/10.2139/ssrn.4204090

Md Rubel Khondoker (Contact Author)

Birmingham City University ( email )

4 Cardigan Street, Curzon
Birmingham, B4 7BD
United Kingdom

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