Analysing the linkage between total factor productivity and tourism growth in Latin American countries.
| Autor | Tzeremes, Panayiotis |
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Introduction
The importance of tourism growth (TOUR) in the generation of economic growth has been extensively recognized by academics and policymakers base the increase in their macroeconomic data on the expansion and development of these findings (Manrai et al., 2018; Flores-Mun~oz et al., 2019; Nguyen et al., 2020; Polemis et al., 2021). Since the work by Balaguer and Cantavella-Jorda (2002), was the first one to formally refer to the tourism-led growth hypothesis (TLGH), a plethora of authors has investigated that discipline [1].
Remained on the same strand but searching this academic question from a different angle. This research studies the connection between the total factor productivity (TFP) index and TOUR in Latin American Countries (LACs). To do this, we employ a data set of 16 LACs during the period 1995-2017 evaluating the time-varying causality of Ajmi et al (2015). Our underlying idea is that the TFP index can be a more effective variable in preference to economic growth to interpret the relationship between economic development and TOUR. Furthermore, a bulk of relevant literature used economic growth (Du et al, 2016; Merida and Golpe, 2016; Tang and Abosedra, 2016; Chiu and Yeh, 2017; Li et al, 2018) with only two studies which used TFP (Liu and Tsai, 2018; Tzeremes, 2021).
In particular, from the beginning of growth economics and the pioneering Solow model (Solow, 1956) TFP has been deemed an intriguing milestone to explicate long-run amelioration. TFP depicts a compound of labor and capital productivity, which explains the rise of technological development. Thus, TFP has classically been considered a vital tool of technological development (Letta and Tol, 2018; Vella, 2018; Nguyen et al, 2021a, b). According to Solow (1956), endogenous growth and neoclassical framework can measure economic growth. Moreover, TFP accounts for the degree of technological development, as a result, it has a direct impact on economic growth but as an exogenous factor. Lastly, based on endogenous growth theories, TFP is a crucial element of economic growth via technological change which is a vital component of TFP (Romer, 1986; Lucas, 1988; Tzeremes and Tzeremes, 2021). Thus, either neoclassical or endogenous growth models state that the TFP index may increase economic growth in the long run period.
We choose to study LACs for many reasons. Initially, there is not much research on the tourism and growth nexus [2]. LACs are a tourist attraction in many aspects. Natural tourist resources encompass famous beaches, lush jungles and great biodiversity. Brazil is at the top of the biodiversity ranking (with more than 3,000 species). Mexico and Costa Rica are included in the top 10 best natural tourism destinations. Moreover, Argentina, Colombia and Peru belong to the top 50 cultural tourism destinations. Apart from natural and cultural tourism, LACs are medical tourism attractions. Brazil is known for plastic surgery and Cuba for cancer treatments. Religious tourism is one more motivation to visit LACs. For example, the Basilica of Our Lady of Guadalupe in Mexico and the National Sanctuary of Our Lady of Aparecida in Brazil are popular destinations with more than 10 million visitors every year. Lastly, LACs are famous for business-economic tourism, Brazil and Mexico are developing economies and Panama and Puerto Rico are enormously open to international trade (Netto et al, 2015).
This research contributes in several ways. First, it sheds light on the relationship between TFP and TOUR for LACs analyzing the role played by the productivity of TOUR. In contrast to previous studies that only focus on the effect of economic growth on tourism development (Du et al, 2016; Merida and Golpe, 2016; Tang and Abosedra, 2016 and Chiu and Yeh, 2017, among others), we pay attention to TOUR, which may arise from increased productivity. Second, we applied the time-varying causality which captures time effects instead of the classical Granger causality (Ajmi et al, 2015). Finally, for the first time, we illustrate the relationship between these two variables for LACs and we emerge the shape of the curve for each country.
The rest of the paper is organized as follows: Section 2 reports the literature review and the method is described in Section 3. Then, Section 4 presents formally the results and lastly, in Sections 5 and 6 the discussion and conclusions are exhibited.
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Literature review
The tourism literature of LAC shows how the growth of the tourism sector can potentiate relationship economic growth as well as its advantages. Tourism led growth hypothesis is confirmed for most of the academic research. Specifically:
For Colombia, Brida etal. (2009) utilizing the Johansen cointegration test and a vector error correction (VEC) model proved the hypothesis that tourism led to growth. Again, for Colombia, and with the same econometric models but this time for the five most popular tourist destinations, Brida and Monterubbianesi (2010) verified the validity of TLGH. Likewise, findings for Chile, yet an extra Granger causality test (Toda-Yamamoto) is used by Brida and Risso (2009) to confirm the TLGH. Not surprisingly, outcomes for Brazil (Brida etal, 2011) and Mexico (Sanchez Carrera etal, 2008). Croes and Vanegas (2008) investigated the validity of TLGH for Nicaragua by implementing the Johansen cointegration test and the traditional Granger causality model. Also, the authors used an extra variable, poverty reduction, and they showed a long-run connection between the three variables. About Granger causality results, a unidirectional causality running from tourism to growth and poverty reduction is revealed, whilst a two-way causality between growth and poverty reduction is suggested. Brida etal. (2010) analyzed the connection between tourism-economic growths in Uruguay and divulged the hypothesis that tourism provokes economic growth. Moreover, they employed the tourism receipts from Argentina (exchange rate) since Argentinean tourists constitute most arrivals in Uruguay. The results demonstrated the validity of the hypothesis that export-led economic growth.
The panel data method was applied by Fayissa et al (2011) to explore the impact of TOUR on economic growth. In particular, they built a multivariable framework implementing a fixed-random effect, a generalized method of moments estimator and a panel quantile fashion on a panel data of 18 LACs. The findings disclosed the general hypothesis which exists that TOUR induces a positive rise in economic growth. Finally, Lionetti and Gonzalez (2012) documented the influence of TOUR on trade leveraging cointegration and vector autoregressive procedures for Argentina, Chile, the Dominican Republic, Mexico, Nicaragua and Venezuela. Neither Granger causality nor long-run linkage are depicted for the six LAC, yet when it comes to the short-run association is verified for Chile, Dominican Republic, Nicaragua and Venezuela. Nonetheless and interesting to observe is the mutual connection between these countries...
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