Determinants of international tourism: a three-dimensional panel data analysis

Abstract

International tourism is a fast growing industry generating half a trillion dollars in annual revenues and accounting for almost 10% of total international trade, and almost half of total trade in services. Yet, it has so far failed to receive the attention it deserves from mainstream economics. This paper attempts to provide an initial understanding of the determinants of international tourism. This paper claims that international tourism, as other forms of trade in services, is driven by unique factors of production, and may be better dealt with in a single industry study rather than in a general equilibrium trade model. In order to understand these determinants the world is viewed as a market of differentiated products, and a discrete choice estimation technique is applied to a large three-dimensional data set of tourist flows. It is shown that a relatively simple estimation technique, combined with a rich data set, can deliver reasonable substitution patterns. It is found, among other things, that political risk is very important for tourism, and that exchange rates matter mainly for tourism to developed countries. These have exchange rate elasticity of about one.

Determinants of Tourist Arrivals in Africa: A Panel Data Regression Analysis

“…The latter are often caused by political instability. Eilat and Einav (2003) find that political risk has a significant impact on tourism demand in both developed and developing countries. Cleverdon (2002, pp 10-11) points further to the difficulty of access to Africa's tourism endowments, 5 the lack of quality tourism products, weak marketing, fragmentation among tour operators and the lack of banking and communication facilities as factors constraining Africa's tourism development.…”

“…The results indicate that the TVP model generate the most accurate forecasts, followed by the static regression model. The only paper that uses panel data analysis is that by Eilat and Einav (2003) in which the pooled logit regression technique is used to identify the determinants of tourism to different regions.…”

“…(1) the economic impact of domestic and/or international tourism on a local economy (see for example Archer, 1977;Kottke, 1988;Zhou et al, 1997;Wang, 1997;Vaughan et al, 2000;Saayman et al, 2000); (2) the importance of tourism for development (see for example Diamond, 1976;Piga, 2003;Saayman et al, 2001); (3) the economic impact of identified events (Randall and Warf, 1996;Gelan, 2003) and facilities (Chen and Hsu, 2001;Walpole and Goodwin, 2000); (4) efforts to incorporate the explanation of tourism demand and international tourism flows (Crouch, 1995;du Preez and Witt, 2003;Coshall, 2000;Smeral and Weber, 2000;Jud and Joseph, 1974;Divisekera, 2003;Eilat and Einav, 2003); and (5) forecasting tourism demand (Witt and Witt, 1992;Song et al, 2003;Song and Witt, 2000).…”

Air Access Liberalisation, Marketing Promotion and Tourism Trade

“…To capture the above we follow Eilat and Einav (2004) and Naudee and Saayman (2004) by using the CPI of a destination country adjusted by the $ exchange rate as a proxy for relative tourism prices to get relative prices (measured as RELATIVE). ‗The inverse of it shows the many baskets of goods a tourist has to give up in his home country in order to buy a basket of goods in the destination country ' (Eilav and Einav, 2004).…”

“…Additionally, a second strand of the literature has sought to underline the elements underpinning tourists' decisions to visit a specific location (see Uysal and Crompton, 1984, Crouch, 1994a, 1994b, 1995Eilat & Einav, 2004, Lim 2006Li et al 2005, Gomezelj, 2011, Kareem, 2009, Naudee and Sayman, 2004, Ibrahim, 2011, Lim and McAleer, 2001. Among the most prominent determinants are: income in country of origin, the cost of travel, relative prices and tourism infrastructure (refer to Witt andWitt, 1995 andLim, 1997 for a review of the empirical literature).…”