A new look to the tourism and economic growth nexus: A clustering and panel causality analysis

Abstract

This paper explores the dynamic relationship between tourism and economic growth using panel data for 144 countries over the period 1995–2019. The study was carried out in two steps. First, the set of countries was classified by considering simultaneously two criteria, tourism and the economic development of the countries over time. Two classifications of homogeneous countries with four clusters each are obtained using a non-parametric methodology and two tourism indicators. Second, the Granger causality was tested for each of the identified groups and the entire sample. The results determined that there were significant differences between clusters and that causality from tourism to economic growth could only be verified for the group of countries with low income and low tourism. This relationship was confirmed by estimating impulse response functions, which showed a positive response of economic growth to innovations in tourism. The tourism sector could, therefore, be a way out of poverty and generate development and prosperity in low-income countries that are in the early stages of tourism development.