Tourism Management 42 (2014) 207e212

Contents lists available at ScienceDirect

Tourism Management
journal homepage: www.elsevier.com/locate/tourman

Tourism and economic growth nexus revisited: A panel causality

analysis for the case of the Mediterranean Region
Can Tansel Tugcu*
Faculty of Economics and Administrative Sciences, Nevsehir University, 50300 Nevsehir, Turkey

h i g h l i g h t s

Panel unit root and cross-sectional dependence techniques were employed

Causal relationship between tourism and economic growth was tested

Bi-directional causality found for tourism receipts and economic growth in Europe

Bi-directional causality found for tourism expenditures and economic growth in Asia

No causality found between tourism and economic growth in Africa

a r t i c l e i n f o a b s t r a c t

Article history: Tourism is perceived as an important source of foreign exchange that is used for nancing economic
Received 9 May 2013 growth. This study offers a modern approach to tourism-led growth and investigates the causal rela-
Accepted 18 December 2013 tionship between tourism and economic growth in the European, Asian and African countries that border
the Mediterranean Sea. The study uses panel data for the period 1998e2011, and adopts a panel Granger
JEL classication: causality analysis developed by Dumitrescu and Hurlin (2012) to assess the contribution tourism makes
O40
to economic growth in each country. The results indicate that the direction of causality between tourism
L83
and economic growth depends on the country group and tourism indicator. Furthermore, the European
Keywords: countries are better able to generate growth from tourism in the Mediterranean region.
Tourism 2013 Elsevier Ltd. All rights reserved.
Economic growth
Panel causality
Mediterranean region

1. Introduction Despite these benets, Balaguer and Cantavella-Jorda (2002)

Current trends in the economic environment motivate govern-
ments to nd and subsidise productive sectors to solve macroeco-
nomic problems such as growth, unemployment and scal or
monetary instabilities. Tourism is one of the sectors that supports
policy makers in overcoming these problems by supplying foreign
exchange that can be used for nancing foreign/domestic debts,
creating regional employment opportunities that are crucial in
coping with unemployment and promoting construction, trans-
portation, accommodation and food/beverage sectors that, in turn,
foster economic growth by providing added value. In addition, this
sector also creates convergence across countries by transferring
income from developed countries to developing ones. Thus, policy
makers can benet from tourism as a policy instrument for
reducing regional welfare inequalities.
* Tel.: 90 5325120886; fax: 90 3842152010.
E-mail address: cttugcu@nevsehir.edu.tr.
argue that, in a more traditional sense, tourism provides foreign
exchange that is necessary for importing capital goods for pro-
duction leading, in turn, to economic growth. From this perspec-
tive, the contribution of tourism to economic growth is called the
tourism-led growth hypothesis, which is a simple reection of the
export-led growth hypothesis.
As in the energy-growth nexus, it is possible to construct the
tourism-led growth hypothesis under four different lines (Ozturk,
2010). First, the growth hypothesis refers to a situation in which
tourism plays a vital role in the economic growth process either
directly and/or as a complement to other production factors. The
growth hypothesis is supported if uni-directional causality is found
from tourism to economic growth. In this case, policies aimed at
subsidising tourism will have a positive impact on economic growth.
Second, the conservation hypothesis means that economic growth is
the dynamic that strengthens the tourism sector. The validity of the
conservation hypothesis is proven if there is uni-directional causality
from economic growth to tourism. In this situation, transferring

0261-5177/$ e see front matter 2013 Elsevier Ltd. All rights reserved.
http://dx.doi.org/10.1016/j.tourman.2013.12.007
208 C.T. Tugcu / Tourism Management 42 (2014) 207e212
subsidies from tourism to another sector will not have a negative
impact on economic growth. Third, the feedback hypothesis denotes a
reciprocal relationship between tourism and growth. The feedback
hypothesis is supported if there exists bi-directional causality be-
tween tourism and economic growth. In the case of the validity of this
hypothesis, tourism conservation policies may decrease economic
growth performance, and similarly, chances of economic growth are
reected back to the tourism sector. Fourth, the neutrality hypothesis
indicates that tourism has no effect on economic growth. The absence
of causality between tourism and economic growth provides evi-
dence for the presence of the neutrality hypothesis. In this context, by
employing two different indicators (i.e., international tourism re-
ceipts and international tourism expenditures), this study aims at
investigating the causal relationship between tourism and economic
growth in the European, Asian and African countries that border the
Mediterranean Sea by employing the panel Granger causality test of
Dumitrescu and Hurlin (2012).
The paper is organised as follows. The next section reviews the
literature and describes the novelty of the research. Section 3
presents the data, methodology and results. Finally, Section 4
concludes the paper.
2. Literature review
Upon an examination of the literature, it is noted that tourism-
growth studies are classied under two strands. The rst strand
includes studies that investigate the causal relationship between
tourism and economic growth by employing Granger causality test
with time series data. Among these studies, Akinboade and
Braimoh (2010), Balaguer and Cantavella-Jorda (2002), Belloumi
(2010), Brida, Carrera, and Risso (2008), Chen and Chiou-Wei
(2009), Durbarry (2002), Gunduz and Hatemi-J (2005), Tang and
Abosedra (2012) and Tang and Tan (2013) support the existence of
the growth hypothesis, while Dritsakis (2004), Kim, Chen, and Jang
(2006) and Lee and Chien (2008) present evidence for the validity
of the feedback hypothesis. On the other hand, Oh (2005), Ozturk
and Acaravci (2009), Payne and Mervar (2010) and Tang and Jang
(2009) contend that the neutrality and conservation hypotheses
are also valid with respect to the tourism and growth relationship.
According to Po and Huang (2008), since time series data have
some inefciency in reecting the long-run relationship between
tourism and economic growth, the second strand of the literature is
composed of studies that analyse the relationship between tourism
and economic growth by using cross-section or panel data. In this
context, Aslan (2013), Falk (2010), Holzner (2011), Lee and
Brahmasrene (2013), Lee and Chang (2008), Po and Huang (2008),
Proenca and Soukiazis (2008), Sequeira and Campos (2005) and
Sequeira and Nunes (2008), and indicate that there can be mixed
results on the relationship between tourism and economic growth
that are sensitive to the specic country group being examined.
The present study, as a complement to the second strand of the
literature, differs from the previous studies in several aspects. First,
and most importantly, this study makes a theoretical contribution
and classies tourism-led growth under four different hypotheses (i.e.,
growth, conservation, feedback and neutrality). This modern classi-
cation, which is not found in any of the previous studies, makes the
causal relationship more specic in terms of explaining why, in some
countries, tourism drives economic growth while the reverse holds
for some others. Second, considering the cross-sectional dependence
and heterogeneity of the sample, the panel causality analysis that this
study adopts is novel to the literature of tourism-led growth. In this
regard, the present study employs a panel Granger causality analysis
recently developed by Dumitrescu and Hurlin (2012), which is su-
perior to former panel Granger causality tests in terms of giving
efcient results even in panels with small sample sizes, being
applicable in unbalanced and/or cross-sectionally dependent panels
without requiring any particular estimation, and allowing different
lag orders for each cross-section unit. Finally, the causal relationship
between tourism and economic growth in the countries that border
the Mediterranean Sea has never been studied in a panel context,
with one exception. Aslan (2013) investigates the causal relationship
between real GDP and tourism receipts in the 12 Mediterranean
coastal countries by employing a panel causality analysis of Hurlin
(2007). However, the present study has substantial departures
from Aslan (2013). For instance, this study handles tourism-led
growth through a modern approach composed of the growth, con-
servation, feedback and neutrality hypotheses, whereas the other
only accounts for the traditional hypothesis. In addition, following
Barro (2002) and Sala-i Martin (2002), who state that the best proxy
for economic growth is the growth of per capita GDP, this study
employs real GDP per capita growth to represent economic growth.
Additionally, tourism is proxied by two indicators (i.e., tourism re-
ceipts and tourism expenditures) in this study, whereas the only
indicator used in Aslan (2013) is tourism receipts. These differences
are crucial for two reasons. First, because economic growth indicates
the growth of real income, it is not appropriate to estimate the impact
of tourism on the level of real income. Thus, using real GDP per capita
growth as the dependent variable satises the necessary condition to
estimate the causal impact of tourism on economic growth. Second,
augmenting the number of independent variables may help deepen
the understanding of the growth, conservation, feedback and
neutrality hypotheses of tourism-led growth. Besides, to reduce the
impact of heterogeneity over the sample, the present study takes the
geographical positions into account and gathers 21 Mediterranean
coastal countries into European, Asian and African panels. However,
Aslan (2013) aggregates the sample (i.e., 12 Mediterranean coastal
countries) into one panel, which may allow for a high degree of
heterogeneity that can decrease the robustness of policy implications
inferred from the ndings. Moreover, disaggregating the sample into
European, Asian and African components may be more efcient in
terms of comparing the effects of tourism on economic growth and
suggesting a policy related to the tourism and growth nexus. Finally,
the methodology followed in this study is a latter version of the
methodology used in Aslan (2013), and as such, it allows each cross-
section unit to have different lag orders. According to Dumitrescu and
Hurlin (2012), this is one of the preconditions for proposing a panel
Granger causality analysis that accounts for cross-sectional depen-
dence. Avoiding cross-sectional dependence is another way of
ensuring the robustness of policy implications. Assuming the sample
countries are likely to be cross-sectionally dependent, it seems to be a
good choice to employ Dumitrescu and Hurlin (2012) rather than
Hurlin (2007). Therefore, in the following section, the causal rela-
tionship between tourism and economic growth in the Mediterra-
nean coastal countries is being investigated.
3. Data, methodology and results
3.1. Data
The data set includes annual real GDP per capita growth (EG),
international tourism receipts (RCPT) in current US$ and interna-
tional tourism expenditures (EXP) in current US$ for the period
1998e2011 in the European, Asian and African countries in
consideration.1 The panel series were attained from the World
1
The European countries are Albania, Bosnia and Herzegovina, Croatia, France,
Greece, Italy, Malta, Monaco, Montenegro, Slovenia, Spain and Turkey. The Asian
countries are Cyprus, Israel, Lebanon and Syria. The African countries are Algeria,
Egypt, Libya, Morocco and Tunisia.
 C.T. Tugcu / Tourism Management 42 (2014) 207e212 209

Table 1
Panel unit root test results

H0: All panels contain unit root

LLC IPS

Variables Constant Constant trend Constant Constant trend

European Countries EG 1.882 (0.88) 2.806 (0.99) 0.303 (0.61) 1.647 (0.95)
RCPT 1.806 (0.03) 3.191 (0.00) 1.241 (0.89) 2.279 (0.01)
EXP 2.889 (0.00) 18.303 (0.00) 0.066 (0.52) 6.334 (0.00)
DEG 5.444 (0.00) 6.195 (0.00) 3.452 (0.00) 1.588 (0.05)
DRCPT 7.700 (0.00) 4.445(0.00) 5.222 (0.00) 1.331 (0.09)
DEXP 7.627 (0.00) 6.905 (0.00) 5.301 (0.00) 2.296 (0.01)

Asian Countries EG 2.592 (0.00) 2.261 (0.01) 1.408 (0.07) 1.285 (0.09)
RCPT 1.090 (0.13) 1.832 (0.03) 0.187 (0.57) 0.459 (0.32)
EXP 1.089 (0.13) 3.393 (0.00) 0.173 (0.56) 0.910 (0.18)
DEG 4.219 (0.00) 3.693 (0.00) 3.171 (0.00) 2658 (0.00)
DRCPT 2.887 (0.00) 1.847 (0.03) 2.429 (0.00) 1.743 (0.06)
DEXP 4.106 (0.00) 2.824 (0.00) 2.320 (0.01) 1.827 (0.04)

African Countries EG 3.993 (0.00) 2.292 (0.01) 3.001 (0.00) 1.138 (0.12)
RCPT 0.898 (0.18) 2.532 (0.00) 1.508 (0.93) 0.173 (0.43)
EXP 0.063 (0.52) 1.945 (0.02) 1.987 (0.97) 0.108 (0.45)
DEG 5.443 (0.00) 5.932 (0.00) 4.819 (0.00) 3.373 (0.00)
DRCPT 2.820 (0.00) 1.468 (0.07) 1.892 (0.02) 2.119 (0.00)
DEXP 2.770 (0.00) 1.924 (0.02) 2.270 (0.01) 2.496 (0.00)

D is the rst-difference operator and numbers in parentheses are p-values.

The LLC test was performed using NeweyeWest bandwidth selection with Bartlett Kernel.
Schwarz Bayesian Criterion was used for determining the optimal lag length.

Bank, World Development Indicators database and World Tourism relations may give rise to the existence of this problem. In the
Organization, Compendium of Tourism Statistics. case of panel data which are cross-sectionally dependent, the
estimation results generally become inconsistent and upward-
3.2. Unit root biased (Bai & Kao, 2006). Thus, it is important to test the exis-
tence of cross-sectional dependence before the analysis.
The rst step for the investigation of causality is to determine Pesaran (2004) proposed a cross-sectional dependency (CD) test
whether the series has any integration orders. For this purpose, this under the null hypothesis of no cross-sectional dependence, which
study employs panel unit root tests developed by Levin, Lin, and is asymptotically distributed as standard normal and efcient even
Chu (2002, hereafter LLC) and Im, Pesaran, and Shin (2003, here- in panels with small sample sizes. The Pesarans CD test statistic
after IPS). that is used for the investigation of cross-sectional dependence in
The LLC (2002) unit root test considers the following panel ADF the present study is as follows:
specication: v
0 1
u
u X X
N1 N
X u 2T @ p A
pi
CD t b (2)
Dyi;t ri yi;t1 di;j Dyi;tj 3 i;t (1) NN  1 i 1 j i1 ij
j1

The LLC (2002) assumes that the persistence parameters ri are where T is the time interval, N is the number of cross-section units,
identical across cross-sections (i.e., ri r for all i), whereas the lag and bp ij is the pair-wise correlation between cross-sections.
order pi may freely vary. This procedure tests the null hypothesis According to test results given in Table 2, the null hypothesis is
ri 0 for all i against the alternative hypothesis ri < 0 for all i. rejected for the European countries even at the 1% level of signi-
Rejection of the null hypothesis indicates a possible panel inte- cance, indicating a strong cross-sectional dependence. However, no
gration process. signicant cross-sectional dependence is found for the Asian and
The IPS (2003) test, which is also based on Eq. (1), differs from African countries in consideration.
the LLC test by assuming ri to be heterogeneous across cross-
sections. The IPS tests the null hypothesis H0 : ri 0 against the 3.4. Causality
alternative hypothesis
H1 : ri < 0; i 1; ::; N1 ; ri 0; i N1 ; ::; N for all i. Accep- To address the cross-sectional dependence and heterogeneity,
tance of the alternative hypothesis allows the individual series to be the present study employs the panel Granger causality test devel-
integrated. oped by Dumitrescu and Hurlin (2012). In light of the existing
The LLC and IPS tests were executed on data both in levels and
rst differences, and results were reported in Table 1. It is evident
that all of the variables are stationary in rst-difference, whereas Table 2
Cross-sectional dependence test results
level results are mixed.
Test Statistic
3.3. Cross-sectional dependence CDEuropean 12.466 (0.00)
CDAsian 0.786 (0.43)
One of the basic problems of panel data econometrics is cross- CDAfrican 0.395 (0.24)

sectional dependence. High degrees of globalisation or cross-unit Number in parentheses is p-value.

210 C.T. Tugcu / Tourism Management 42 (2014) 207e212

literature, causality analysis is based on a functional relationship statistic generated by Dumitrescu and Hurlin (2012) assumes the
that is formulated in the following manner: following:

Economic Growth f Tourism (3) 1 X

where economic growth is proxied by annual real GDP per capita
growth and tourism is proxied by international tourism receipts
and international tourism expenditures, respectively.
Dumitrescu and Hurlin (2012) proposed a panel causality test
based on the individual Wald statistic of Granger non-causality
averaged across the cross-section units. The testing procedure
considers the heterogeneity of causal relationships and the het-
erogeneity of the regression model used for testing Granger cau-
sality. The linear panel regression model followed by Dumitrescu
and Hurlin (2012) is as follows:
X
J X
J and Asian countries. Finally, there is no causal relationship between
yi;t ai lji yi;tj bji xi;tj 3 i;t
j1 j1
where y is real income growth and x is the vector of the tourism
variable (i.e., international tourism receipts and international
tourism expenditures).
Dumitrescu and Hurlin (2012) state that a homogeneous
specication of the relation between the variables x and y does not
allow to interpret causality relations if any individual from the
sample has an economic behaviour different from that of the
others. Thus, they propose an average Wald statistic that tests the
null of no causal relationship for any of the cross-section units, H0 :
bi 0; i 1; .; N; against the alternative hypothesis that
causal relationships occur for at least one subgroup of the panel,
H1 : bi 0; i 1; ::N1 ; bi s0; i N1 1; N1 2; .; N:
Rejection of the null hypothesis with N1 0 indicates that x
Granger causes y for all i, whereas rejection of the null hypothesis
with N1 > 0 provides evidence that the regression model and the
causal relations vary from one individual or the sample to another.
Under these circumstances, the average of the individual Wald
N
Hnc
WN;T Wi;T (5)
N
i1
where Wi;T is the individual Wald statistic for the i-th cross-section
unit.
Estimated causal relationships, which are presented in Table 3,
indicate that in the case of international tourism receipts, there is
evidence for the validity of the feedback hypothesis for the Euro-
pean countries, whereas a country specic growth hypothesis holds
for the Asian countries, and the neutrality hypothesis is observed
for the African countries. However, when tourism is proxied by the
expenditures, the feedback hypothesis is present for the European
(4) tourism and economic growth in the African countries, thus indi-
cating the validity of the neutrality hypothesis.
In light of the statistical results presented in Table 3, it is possible
to construct a nal table that clearly demonstrates which of the
growth, conservation, feedback and neutrality hypotheses is sup-
ported for the countries in consideration. In this regard, Table 4
shows that, in the case of international tourism receipts, the
growth hypothesis is valid for France, Italy, Spain, Monaco and
Syria; the conservation hypothesis holds for Slovenia; the feedback
hypothesis is supported for Albania, Croatia and Greece; and the
neutrality hypothesis is valid for Bosnia and Herzegovina, Malta,
Montenegro, Turkey, Cyprus, Israel, Lebanon, Algeria, Egypt, Libya,
Morocco and Tunisia. On the other hand, when tourism is proxied
by the international tourism expenditures, the growth hypothesis
holds for Italy, Spain, Turkey and Lebanon; the conservation hy-
pothesis is supported for Malta, Monaco, Montenegro and Israel;
the feedback hypothesis is valid for Croatia and France; and the
neutrality hypothesis holds for Albania, Bosnia and Herzegovina,
Greece, Slovenia, Cyprus, Syria, Algeria, Egypt, Libya, Morocco and
Tunisia.

Table 3
Panel causality test results.

Cross-section units Null hypotheses

H0: RCPT does not cause Growth H0: Growth does not cause RCPT H0: EXP does not cause Growth H0: Growth does not cause EXP

Wald Decision Wald Decision Wald Decision Wald Decision

European countries *13.843 Reject *6.585 Reject *13.640 Reject *5.016 Reject
Albania *16.489 Reject **7.376 Reject 1.880 Accept 2.554 Accept
Bosnia and Herzegovina 2.431 Accept 3.223 Accept 2.937 Accept 3.281 Accept
Croatia **7.667 Reject **6.080 Reject *20.408 Reject **6.455 Reject
France **6.094 Reject 2.824 Accept ***5.250 Reject ***5.020 Reject
Greece ***4.803 Reject *11.213 Reject 0.393 Accept 0.522 Accept
Italy **6.558 Reject 0.662 Accept ***4.931 Reject 0.921 Accept
Malta 0.652 Accept 0.722 Accept 1.395 Accept **7.436 Reject
Monaco *12.872 Reject 1.471 Accept 2.214 Accept ***4.958 Reject
Montenegro 1.762 Accept 0.218 Accept 1.701 Accept **6.531 Reject
Slovenia 1.455 Accept ***5.533 Reject 2.004 Accept 2.814 Accept
Spain *14.965 Reject 2.867 Accept *16.479 Reject 3.944 Accept
Turkey 2.659 Accept 0.323 Accept **7.454 Reject 2.913 Accept
Asian countries ***1.885 Reject L0.529 Accept ***1.647 Reject **2.443 Reject
Cyprus 2.181 Accept 0.615 Accept 2.441 Accept 1.870 Accept
Israel 0.075 Accept 0.091 Accept 1.159 Accept *8.689 Reject
Lebanon 1.399 Accept 0.295 Accept **4.272 Reject 0.165 Accept
Syria **5.677 Reject 1.498 Accept 0.785 Accept 0.185 Accept
African countries L0.066 Accept L0.226 Accept 0.443 Accept L1.195 Accept
Algeria 1.332 Accept 1.939 Accept 2.195 Accept 0.081 Accept
Egypt 0.028 Accept 0.090 Accept 0.426 Accept 0.080 Accept
Libya 1.924 Accept 0.726 Accept 0.319 Accept 0.107 Accept
Morocco 2.284 Accept 0.093 Accept 1.331 Accept 0.427 Accept
Tunisia 0.168 Accept 1.237 Accept 0.021 Accept 0.029 Accept

*, **, and *** Indicate rejection of the null hypothesis at the 1, 5, and 10 percent levels of signicance, respectively.
 C.T. Tugcu / Tourism Management 42 (2014) 207e212 211

Table 4 tourism specialisation is one of the highest in the world (Po &
Country specic hypotheses Huang, 2008). Finally, tourism is a sector that sometimes imposes
Cross-section units Tourism indicator adverse economic, sociological, environmental and ecological costs
Receipts Expenditures
on a countrys economy (Gursoy & Rutherford, 2004; Lee & Chang,
2008; Lee & Chien, 2008), and as a developing country, Turkey often
European countries Feedback Feedback
faces these types of costs that are capable of breaking down the link
Albania Feedback Neutrality
Bosnia and Herzegovina Neutrality Neutrality between tourism and economic growth. Hence, the validity of the
Croatia Feedback Feedback neutrality hypothesis in Turkey, the feedback hypothesis in Greece,
France Growth Feedback the conservation hypothesis in Slovenia and the growth hypothesis
Greece Feedback Neutrality
in France may all be regarded as natural outcomes of the link be-
Italy Growth Growth
Malta Neutrality Conservation tween tourism and economic growth.
Monaco Growth Conservation As the Table 4 indicates, the validity of the hypotheses may also be
Montenegro Neutrality Conservation sensitive to the indicators employed. In the present study, while the
Slovenia Conservation Neutrality growth hypothesis holds for the Asian panel with respect to the re-
Spain Growth Growth
ceipts, it reverts to feedback when the indicator is tourism expendi-
Turkey Neutrality Growth
Asian countries Growth Feedback tures. If one assumes the receipts as a part of the national production
Cyprus Neutrality Neutrality process, it is natural to expect that the growth hypothesis exists.
Israel Neutrality Conservation However, the international tourism expenditures represent income of
Lebanon Neutrality Growth
the visitors that was generated by a foreign production process, thus
Syria Growth Neutrality
African countries Neutrality Neutrality
indicating another channel for explaining the impact of tourism on
Algeria Neutrality Neutrality economic growth. In this context, Lee and Chang (2008), assuming the
Egypt Neutrality Neutrality international tourism expenditures stimulate domestic tourism con-
Libya Neutrality Neutrality struction and physical and/or human capital accumulation in the host
Morocco Neutrality Neutrality
country, contend that the tourism sector contributes signicantly to
Tunisia Neutrality Neutrality
economic growth. Additionally, if interrelations between the tourism
sector and the rest of the real economy are strong enough, economic
With the exception of the African countries, Table 4 exhibits some growth may become an instrument that, in turn, improves the ef-
mixed results about the country specic hypotheses, and these re- ciency of the tourism sector. Thus, for the countries in which these
sults are either theoretically or empirically consistent with the assumptions are available, it is plausible to anticipate that international
existing literature. First, as Chen and Chiou-Wei (2009) state, the tourism expenditures will result in the feedback hypothesis, whereas
causal relationship between tourism and economic growth is not the growth hypothesis will hold for the case of tourism receipts.
stable, and the relationship does not necessarily reach a common Finally, country specic hypotheses in the present study show
agreement. In this sense, depending on different dynamics, such as either consistency or inconsistency with the ndings of the previous
the economic structures, initial conditions, sectoral interrelations studies that address with the tourism-led growth hypothesis. For
and historical background of the countries, the relationship may instance, in the case of tourism receipts, the results are consistent
vary and studies could result in different hypotheses in the context of with Balaguer and Cantavella-Jorda (2002) for Spain, Dritsakis (2004)
tourism-led growth, even for the same sample. For instance, using for Greece, Proenca and Soukiazis (2008) for Italy and Spain, Ozturk
similar data sets, Lee and Chien (2008) and Chen and Chiou-Wei and Acaravci (2009) for Turkey, and Aslan (2013) for Malta and
(2009) investigate the validity of the tourism-led growth hypothesis Egypt; but contrast to Gunduz and Hatemi-J (2005) for Turkey,
for the Taiwan economy and support the feedback and the growth Proenca and Soukiazis (2008) for Greece, Belloumi (2010) for Tunisia,
hypotheses, respectively. Similarly, Gunduz and Hatemi-J (2005) Payne and Mervar (2010) for Croatia, and Aslan (2013) for Croatia,
and Ozturk and Acaravci (2009) analyse the existence of the tourism- Greece, Italy, Spain, Cyprus and Tunisia. On the other hand, since
led growth hypothesis in Turkey and the former results in the growth none of these studies employ international tourism expenditures as
hypothesis, whereas the latter supports the neutrality hypothesis. In the tourism indicator, no possible comparisons are available.
short, the empirical literature also provides evidence regarding the
volatility of the relationship between tourism and economic growth. 4. Conclusion
Another important point illustrated in Table 4 is the variety of
supported hypotheses in the European countries. For example, in In this study, the causal relationship between tourism and
the case of tourism receipts, the growth hypothesis holds for economic growth in the European, Asian and African countries that
France, whereas the conservation hypothesis is valid for Slovenia; border the Mediterranean Sea was investigated by using annual
and while the feedback hypothesis is supported for Greece, the panel data covering the period 1998e2011. To this end, the study
neutrality hypothesis holds for Turkey. A possible explanation of employed a panel Granger causality test that was developed by
these results may lie in the economic, political, sociological, envi- Dumitrescu and Hurlin (2012).
ronmental and ecological structures of the individual countries. Although the ndings support evidence for all four hypotheses, it is
According to the World Tourism Organization 2012 Tourism High- clear that the direction of causality between tourism and economic
lights Report, France is the most visited country with 79.5 million growth is country and indicator specic. There are several possible
visitors in the world, and it ranks the third with the tourism rev- explanations for this result. First, if income generated by the tourism
enue of 55.6 billion US dollars. However, Slovenia is a country that sector is taken into account among leakages, it would be vulgar eco-
has recently experienced a rapid transition from socialism to nomics to assume higher tourism revenues and/or expenditures
market economy, and as a result, structural changes have occurred indicate faster economic growth. For an economy in which most of the
in its tourism sector. For the Slovenian economy, the government inputs to tourism are imported, income generated by the sector be-
has placed pressure on the sector in furtherance of the business and comes a leakage. In such an economic structure, the expected causal
congress tourism, spa tourism and gambling tourism (Dwyer et al., impact of tourism on economic growth may disappear. However, even
2012). With respect to Greece, policy makers have declared tourism though inputs of the tourism sector are import-oriented in some
as one of the key sectors for economic development, as its degree of countries, it can be noted that the causality is from tourism to
212 C.T. Tugcu / Tourism Management 42 (2014) 207e212
economic growth. This may arise simply due to the growth effect
driven by the initial conditions such as lower national income and/or
population of the economy in consideration. Because, the growth ef-
fect originated from tourism can be relatively bigger in the economies
that have worse initial conditions than the economies with better
ones. In other words, the marginal physical product of the inputs
allocated in tourism in those countries may be relatively higher.
The second explanation of why causality goes from tourism to
economic growth in some countries and it is in the opposite di-
rection for some others can be attributed to the interconnections
among the sectors. Assuming the tourism is linked to many other
sectors, it is expected that the more tourism develops, the more the
others produce and the faster an economy grows and vice versa.
The tourist attraction is another aspect inuencing the direction
of the causality between tourism and economic growth. Countries
with an established tourist attraction are likely to benet from the
inow of tourists in the long run which, in turn, fosters economic
growth. However, places that do not have such a long history of
tourism rely on their material to maintain tourist inow, and eco-
nomic growth is the only way to invest in tourism and sustain the
inows. In the absence of economic growth, the development of the
tourism sector diminishes. In this sense, it can be anticipated that the
causality between tourism and economic growth is from tourism to
growth in the countries with established tourist attractions, whereas
it is from growth to tourism in the countries having the material ones.
Finally, the economic growth itself may play a vital role in deter-
mining the direction of causality between tourism and economic
growth. Since growth also means the redistribution of income, it may
result in the inefciency of resource allocation. If the resources are
allocated unequally among the sectors, some of the sectors will not
receive sufcient resources for development. Thus, if the share of re-
sources allocated for tourism is less relative to its contribution to
economic growth, it is not possible to construct a causal link from
economic growth to tourism, despite there being a causal link from
tourism to growth.
These may all be possible explanations for why, in some countries,
tourism causes economic growth, while causality goes from economic
growth to tourism in some others. Moreover, modelling these cir-
cumstances may be a potential direction for future studies aimed at
investigating the causality between tourism and economic growth.
However, in the present case, the European countries seem to be the
ones that benet from tourism as an effective input and/or output for
economic growth in the Mediterranean region. This implies that a
policy that subsidises tourism will, in turn, affect economic growth in
the European Mediterranean coastal countries more so than it will in
other countries.
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Can Tansel Tugcu is an Assistant Professor at the
Department of Economics, Faculty of Economics and
Administrative Sciences, Nevsehir University, Nevsehir,
Turkey. He obtained his Ph.D. in Economics from Erciyes
University, Institute of Social Sciences, Kayseri, Turkey.
His research interest encompasses Development
Economics.