Does Tourism lead to growth?

This IMF econ paper says it does:

 

 

We find that there is a positive relationship between the extent of tourism specialization and economic growth. An increase of one standard deviation in the share of tourism in exports leads to about 0.5 percentage point in additional annual growth, everything else being constant.

They use World Heritage Indicators as a instrument to measure impact of tourism. I didn’t understand much of the ecotrics methodology but liked this application of World Heritage Indicators.

However, tourism can never become a growth strategy and at best complement the main growth strategy:

 

 However, one has to think about the opportunity cost of a tourism based strategy given other paths for development, most noticeably the “Asian miracles”. On one hand, it is  likely that developing tourism requires less capital, infrastructure and skilled labor when compared to a manufacturing, export oriented strategy. On the other hand, it seems to rule out the type of growth record in the Asian miracles (on the order of 6 percent per year over 20 years). To illustrate this point, let us consider the “typical” developing country in the sample. It would have about 1 percent expected annual growth and an 8 percent tourism share of exports of goods and services. To reach growth of 6 percent per year, it would need to increase tourism receipts as a share of exports by more than 70 percent, or 10 times the standard deviation. It is, to say the least, very unlikely to achieve such a target for most countries.

What all economists keep doing? Amazing… Next time you visit any of the heritage sites, think about its contribution to economic growth as well.
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One Response to “Does Tourism lead to growth?”

  1. Does Tourism lead to growth? « acc3ss.info Says:

    […] Go here to see the original: Does Tourism lead to growth? […]

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