A Threshold Analysis and Quantile Regression Approach
By applying threshold analysis and quantile regression techniques, we investigate the linearity of the relationship between tourism receipts and economic growth. We find that a threshold exists, below and above which the relationship between tourism receipts and economic growth changes. In our sample, the threshold for tourism receipts is at 3.82% of GDP. Specifically, our findings suggest that tourism receipts have a more pronounced effect on economic growth below the threshold than above the threshold. From the quantile regression analysis, we further find that countries have greater benefits from tourism at lower levels of economic growth. Thus, policymakers designing tourism policy may consider that the marginal benefit of tourism on growth wanes beyond certain levels in spite of the fact that tourism receipts are an important driver of economic growth at all levels of growth.
JEL codes: O40, O47, O55, Z30, Z32.