The Tourism-Led Growth Hypothesis Revisited: A Managerial Perspective

Abstract

The scope of this study is to provide fresh evidence on the Tourism-Led Growth Hypothesis (TLGH) using a panel of 142 countries spanning the period 1995-2018. The relevant work deviates from earlier studies by allowing the relationship between tourism and economic growth to take a non-specified and thus flexible functional form. The empirical results drawn from the Semi Parametric Fixed Effects Model (SPFEM) unveil a meaningful inverted-U-shaped relationship between tourism specialization and economic growth strongly supporting the TLGH. This signifies that a rise in tourism specialization proxied by tourism receipts fosters economic activity to a certain level, beyond which a further increase might result in an economic downturn. The empirical results survive robustness checks under the inclusion of two tourism specialization indicators and an alternative semi-parametric estimator. Lastly, significant policy implications are also discussed highlighting the role of competition in designing and implementing effective managerial strategies in the tourism industry.