The tourism-led growth hypothesis: a comparative study for the MERCOSUR countries

The aim of this paper is to provide evidence for the tourism-led-growth

hypothesis for the four countries of MERCOSUR regional trade block, analyzing

differences and similarities from a comparative perspective. In particular,

the study empirically explores whether tourism activity leads –on the long

run– to economic growth, or, alternatively, whether economic expansion drives

tourism growth, or indeed a bi-directional relationship exists between the two

variables. To this end, cointegration analysis, exogeneity and causality tests are

applied to quarterly data for the period 1990 - 2011. The findings show the

existence of a cointegrating relationship between each real per capita GDP and

tourism Even though the evidence supports the tourism-led growth hypothesis

for all the countries, the elasticity of real per capita GDP with respect to tourism

activity differs between them. The long run equations estimated (Vector

Error Correction models) show that the higher elasticity corresponds to the

smaller countries, Paraguay and Uruguay (both nearly 0.4). On the contrary,

the smaller elasticity corresponds to the mayor economy of the regional block,

Brazil (about 0.10). The elasticity for Argentina is around 0.30. In almost all

the countries, the exogeneity and causality analysis do not allow rejecting the

hypothesis that tourism activity drives economic growth unidirectionally. The

exception is Uruguay, where the relationship found is bidirectional

Juan Gabriel BRIDA
Juan Sebastián Pereyra
Fiorella Pizzolon
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