Testing the relationship between employment and tourism: a fresh evidence from the ARDL bounds test with sharp and smooth breaks

Abstract

PurposeThis study aims to investigate the effect of the tourism sector on employment in 13 Mediterranean countries. In addition, the impact of economic growth and inflation rate, which are included in the analysis as control variables, on the employment rate are investigated.Design/methodology/approachFor this study, data from 1995 to 2018 and the ratio of the employed population, the number of international tourist arrivals, the annual growth rate of real gross domestic product (GDP) and the annual percentage change in the Consumer Price Index (CPI) were used. First, the authors investigated the relationship between variables using the Autoregressive Distributed Lag (ARDL) Bounds Test with Sharp and Smooth Breaks. Then, after determining the significant cointegration relationship, the long-term and short-term coefficients were also estimated.FindingsThe results show a cointegration relationship for Cyprus, Greece, Israel, Malta and Tunisia. Tourism demand has a positive effect on all these countries and economic growth positively affects the employment rate only in Greece, Israel and Tunisia. Besides, the inflation rate has a negative effect in Israel and Tunisia and a positive effect in Malta. Overall, the authors' results provide important policy suggestions, such as the training of the employees in the tourism sector should be improved to keep up with the requirements of the times.Practical implicationsThe impact of the tourism sector on total employment varies from country to country. In particular, the employment creation policies of the sector need to be changed by taking technological changes into consideration.Originality/valueSince tourism is a labor-intensive sector, tourism's impact on employment is an important research topic. However, whether this effect applies to all countries is debatable. Furthermore, the development of technology can also reduce employment in labor-intensive sectors. Therefore, this research can be regarded as important as this research addresses such a critical current issue and suggests a novel econometric method such as the ARDL Bounds Test with Sharp and Smooth Breaks.

Tourism and Economic Misery: Theory and Empirical Evidence from Mexico

“…For example, in Slovenia, it was found that tourist arrivals exert a positive impact on the labor market (Rotar et al 2023). It has also been proved that tourism demand has a positive effect on employment in countries such as Cyprus, Greece, Israel, Malta, and Tunisia (Yılancı and Kırca 2023). Similar evidence has been found in the case of the so-called "Emerging 7" economies (Zhao et al 2023).…”

Development of a Complex Vulnerability Index for Fishing Shelters—The Case of Cyprus

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