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Middle-East Journal of Scientific Research 10 (1): 28-32, 2011 ISSN 1990-9233
© IDOSI Publications, 2011

Tourism and Economic Growth in Developing Countries: P-VAR Approach 1

Ahmad Jafari Samimi, 2Somaye Sadeghi and 3Soraya Sadeghi

1

Faculty of Economics, University of Mazandaran, Babolsar, Iran 2
Faculty of Economics, University of Mazandaran, Babolsar,
Iran and Member of Young Researchers Club at Islamic Azad University, Firuzkoh Branch, Iran 3
Faculty of Economics, Islamic Azad University, Firuzkoh Branch, Firuzkoh, Iran Abstract: This Paper examines the causality and long-run relationships between economic growth and Tourism development in developing countries using P-VAR approach during 1995-2009. The findings reveal that there is a bilateral causality and positive long-run relationship between economic growth and Tourism development. In the other words, the tourism-led growth hypothesis is confirmed, as well as, output level which relates to economic well being and level of development is important in attracting tourist. JEL Classification: L83 % F21

Key words: Tourism Industry % Economic Growth % Developing Countries % P-VAR approach INTRODUCTION

economic increase or, alternatively, did economic
expansion strongly contribute to tourism growth instead?
Some studies denote unidirectional causality from tourism
to growth as documented in [2] for Spain; [3] for Greece;
[4] for Taiwan; [5] for Turkey. By contrary, other studies
revealed strong bidirectional causality between tourism
growth and economic growth as documented in [6] for
China, [7] for non OECD, [8] for Mauritius. Moreover,
there are some studies such as [9] for South Korea that
implied on no causality between tourism growth and
economic growth.
Despite the belief in tourism-led economic
development, relatively speaking not many studies has
rigorously investigated the causal and long-run
relationships between tourism and economic growth.
Moreover, most studies have indeed been dealing with
samples of developed countries and despite the
increasing importance of tourism for developing
economies, yet even lesser not to say no studies have
been found to rigorously assess the relationship.
Likewise, researches that analyses the role of tourism on
economic performance focusing exclusively on cross
sectional and panel data for developing country cases is
scarce. Hence, This paper emphasizes the importance of
the economic growth and international tourism in
developing countries using P-VAR approach, because the
recognition of the existence of a causal relationship
between international tourism and economic growth as

Tourism has become one of the most significant
export sectors in many developing countries. A general
consensus has emerged that it not only increases foreign
exchange income, but also creates employment
opportunities, stimulates the growth of the tourism
industry and by virtue of this, triggers overall economic
growth. As such, tourism development has become an
important target for most governments, especially for
developing countries. The World tourism Organization
(WTO) statistics indicate that the annual average growth
rate of international tourism arrivals in developing
countries for the years 1990-2005 was 6.5%, compared to
4.1 % growth worldwide over the same period. Tourism’s
contribution to economic growth and development could
be seen from its exports and this according to [1]
represents over 40% of all services exports, which puts it
as the highest category of global trade. [1] estimate put
tourism to have accounted between 3% - 10% of the GDP
in the developing world. In general, there is an increasing
and widely accepted belief that tourism can play a
fundamental role for developing countries to achieve
economic growth and development.
This belief that tourism can promote, if not, plainly,
cause long-run economic growth is known in literature as
the tourism-led growth...
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