A Threshold Analysis and Quantile Regression Approach
By applying threshold and quantile regression techniques, we investigate whether the relationship between tourism receipts and economic growth is nonlinear. We find that a threshold exists when tourism receipts is 3.82% of GDP, below and above which the relationship between tourism receipts and economic growth changes. 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 analysis, we further find that countries have higher tourism benefits at lower levels of economic growth and, within each quantile, the benefits are always larger below the threshold. Thus, policymakers designing tourism policy must be aware that while tourism receipts is an important driver of economic growth at all levels of growth, their marginal benefit on growth wanes beyond certain levels.