The Impact of Tourism on Economic Growth in Island Economies

By Boopen Seetanah, Rojid Sawkut and Taruna Shalini Ramessur.

Published by The Sustainability Collection

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Article: Print $US10.00
Article: Electronic $US5.00

Island economies are generally well known tourist destinations and it is presumed that thus sector contributes a lot to their economy. In spite of this, we have not come across any empirical study that investigates the contributions of tourism to economic growth for these countries. Using a panel data of 12 island economies for the years that span from 1990 to 2006, this study explores the potential contribution of tourism to economic growth and development within the conventional augmented Solow growth model. Since economic growth is argued to be essentially a dynamic phenomenon, in addition to fixed effect estimates, we additionally employed Generalised Methods of Moments (GMM) method to account for these issues. The results show that tourism significantly contribute both to the current level of gross domestic product and the economic growth of island economies as do investments in physical and human capital and also openness. Moreover, growth is observed to be a dynamic phenomenon as judged by the positive and significant lagged dependent variable from the GMM estimates. Our findings imply that island economies could enhance their short-run economic growth by strategically strengthening their tourism industries.

Keywords: Tourism, Economic Growth, Island Economies, Dynamic Panel Data, Fixed Effects

The International Journal of Environmental, Cultural, Economic and Social Sustainability, Volume 5, Issue 3, pp.319-328. Article: Print (Spiral Bound). Article: Electronic (PDF File; 1.151MB).

Boopen Seetanah

Senior Lecturer, SOPSPAM, University of Technology, Mauritius, Port Louis, Port Louis, Mauritius

Msc, Mphil Selected Publications Journal Articles (in print or forthcoming) 1) ‘Assessing the contribution of land, sea and air transport capital to the economic performance of the small island state of Mauritius’ with A J Khadaroo, 2007, Applied Economics Letters, 14, 1151-1155; 2) ‘Human capital and Economic development: Allowing for causality and feedback effects in a VAR framework' 2007, Journal of Applied Economics, VI, 86-95; 3) ‘Financial development and economic growth: An ARDL approach for the case the small island state of Mauritius’, 2008, forthcoming in Applied Economics; 4) ‘Transport and Tourism Development’, 2007, with A J Khadaroo, in Annals of Tourism Research, 34 (4), 1021-1032; 5) ‘Transport infrastructure and tourism development: A dynamic Gravity model Approach’, 2008, with A J Khadaroo, forthcoming in Tourism Management; 6), ‘Transport and economic performance: The case of Mauritius’, 2008 with A J Khadaroo, forthcoming in Journal of Transport Economics and Policy; 7) ‘Determinants of Capital Structure: A case study from a small island developing economy’ 2007, with D Padachi and R K Ronoowah, Journal of Applied Finance, Vol 13(3), 5-28; and others.

Rojid Sawkut

University of Mauritius, Mauritius

Dr Taruna Shalini Ramessur

Senior Lecturer, Economics and Finance, University of Technology Mauritius, La Tour keonig, Port Louis, Mauritius

T. Shalini Ramessur is senior lecturer at the University of Technology in Economics and Finance and maintains an interest in public and development economics as well as international trade and econometrics. She has been and is currently engaged in many consulting projects with COMESA, UNDP, AERC, LOGIN Africa pan –African network and SARUA, IPPG among others. Be it at the national or international level, she has participated in various workshops, seminars and presented papers at conferences. She has also worked as research leader for Mauritius on a research project for LOG-IN Africa [Local Governance and ICTs Research Network for Africa], which is an emergent pan-African network of researchers and research institutions from nine countries, one of them being Mauritius.

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