Revisiting the Tourism-Led Economic Growth Hypothesis: The Case of China

Abstract

This article examines the relationship between the level of tourism specialization (TS) and economic growth using a panel dataset covering 31 provinces in mainland China from 1995 to 2013. A quadratic function was introduced following the basic economic law of returns to overcome the weaknesses of constant returns to scale associated with the tourism-led economic growth hypothesis (TLGH). Using tourist arrivals as a percentage of host population (TA) and tourism receipts as a share of real GDP (TR) as the indicators of TS which represent respectively the level/size and the quality/structure dimension of TS, the system generalized method of moments (SYSGMM) regression results suggest that a meaningful inverted-U- or an N-shaped relationship exists between tourism specialization and economic growth. Based on the portfolio of TA and TR in destinations, the effects and characters of tourism on economic growth are discussed regarding the future direction of regional development.

Where Can Tourism-Led Growth and Economy-Driven Tourism Growth Occur?

“…Unlike previous empirical studies applying panel causality tests to understand the tourism growth -economic expansion nexus across different groups (Lee and Chang 2008), our method is able to highlight individual factors that might be masked in the panel as a group. Also, different from past studies employing (dynamic) panel data model understanding TLG (Zuo and Huang 2018), our method gauged the TLG occurrence based on the first-step individual causality tests instead of the estimated coefficients from the regression, and therefore, its occurrence can be rigorously evaluated.…”

“…This variable is included in the TLG and EDTG equations to test Hypotheses 2 and 6, respectively;  lnarea, the log of land area (in 10,000 km 2 ), which represents the land area of each region. This variable is included in the TLG equation to test Hypothesis 3;  lntour_GDP, the log of international tourism revenue relative to GDP, which represents the level of tourism specialization and tourism dependence (Zuo and Huang 2018). This variable is included in the EDTG equation to test Hypothesis 4.…”

Threshold Effect of Tourism Development on Economic Growth Following a Disaster Shock: Evidence from the Wenchuan Earthquake, P.R. China

“…He found that a positive relation between tourism development and economic growth for the ten countries showed substantial variation across countries. Zuo and Huang employed a system generalized method of moments (SYSGMM) to explore the non-linear relationship between tourism specializations and economic growth in the 31 provinces of mainland China [26]. The empirical results reveal that there is a meaningful N-shaped or inverted-U-shaped relationship between tourism specializations and economic growth.…”

“…In tourism literature, the tourism-led growth hypothesis (TLGH) is mostly used to analyze the effect of tourism development on economic growth based on the country or region level. Scholars have recently extended the studies of TLGH to four main hypotheses: (1) Tourism-led growth hypothesis itself [21,25,26], (2) conservation hypothesis [21,25,26], (3) feedback hypothesis [21,27], and (4) neutrality hypothesis [21,25,28].…”

“…In addition, other scholars have found that tourism development negatively affects economic growth [26,47]. The symptoms of Dutch disease, first put forward by Corden and Neary [48], are often used to illustrate the unfavorable economic effects of tourism expansion: Drawing resources and labor from other industries to tourism-oriented sectors, increasing local land and house prices, and reducing social welfare [22,47,[49][50][51][52], and thus hampering long-term economic growth.…”