The significant impact of international tourism in stimulating economic growth is especially
important from a policy perspective. For this reason, the relationship between international
tourism and economic growth would seem to be an interesting empirical issue. In particular, if
there is a causal link between international tourism demand and economic growth, then
appropriate policy implications may be developed. The purpose of this paper is to investigate
whether tourism specialization is important for economic development in East Asia and the
Pacific, Europe and Central Asia, Latin America and the Caribbean, the Middle East and North
Africa, North America, South Asia, and Sub-Saharan Africa, over the period 1991-2008. The
impact of the degree of tourism specialization, which is incorporated as a threshold variable, on
economic growth is examined for a wide range of countries at different stages of economic
development. The empirical results from threshold estimation identify two endogenous cut-off
points, namely 14.97% and 17.50%. This indicates that the entire sample should be divided into
three regimes. The results from panel threshold regression show that there exists a positive and
significant relationship between economic growth and tourism in two regimes, the regime with
the degree of tourism specialization lower than 14.97% (regime 1) and the regime with the
degree of tourism specialization between 14.97% and 17.50% (regime 2). However, the
magnitudes of the impact of tourism on economic growth in those two regimes are not the same,
with the higher impact being found in regime 2. An insignificant relationship between economic
growth and tourism is found in regime 3, in which the degree of tourism specialization is greater
than 17.50%. The empirical results suggest that tourism growth does not always lead to
economic growth.
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