Tourist arrivals, international tourist expenditure, and economic growth in BRIC countries

• Published date: 01 May 2021
• Author: Gulnawaz Usmani,Vaseem Akram,Bushra Praveen
• Date: 01 May 2021
• DOI: http://doi.org/10.1002/pa.2202

ACADEMIC PAPER

Tourist arrivals, international tourist expenditure,

and economic growth in BRIC countries

Gulnawaz Usmani

1

| Vaseem Akram

2

| Bushra Praveen

3

1

Department of Economics, Poona College of

Arts, Science and Commerce, Pune, India

2

Department of Liberal Arts, Indian Institute of

Technology Hyderabad, Sangareddy, India

3

School of Humanities and Social Sciences,

Indian Institute of Technology Indore, Simrol,

India

Correspondence

Vaseem Akram, Department of Liberal Arts,

Indian Institute of Technology Hyderabad,

Sangareddy, Telangana 502285, India.

Email: akramvaseem001@gmail.com

The aim of this paper is to examine the impact of tourism arrivals and tourist

expenditure on economic growth in case of four developing countries (Brazil, Russia,

India, and China) using annual data from 1995 to 2016. To achieve this objective, we

apply Dumitrescu–Hurlin causality test and panel data models. The results indicate

that tourist expenditure has a positive impact on economic growth. Further, the

results show that tourist arrivals do not have any significant effect on economic

growth. The direction of causality shows that tourist expenditure has bidirectional

causality with economic growth. The policy suggests that the investment environ-

ment must be upgraded through appropriate measures such as deregulation in eco-

nomic activity; developing the port facilities, road network, railways, and

telecommunication facilities; achieving clarity in trade policy and flexibility in labor

markets; and setting a suitable regulatory framework and tariff structure and the

country must grow in terms of better facilities and infrastructure for tourists.

JEL CLASSIFICATION

Z30; F43; C23

1|INTRODUCTION

Tourism is an important economic engine and has emerged as a key

sector of the world economy. It has been providing socioeconomic

development. It creates employment opportunities and thus cre-

ates demand and infrastructure development as a result of it

(Davis, Allen, & Consenza, 1988; Belisle & Hoy, 1980; Khan,

Seng, & Cheong, 1990; Uysal & Gitelson, 1994; Archer, 1995;

Durbarry, 2002). Tourism has the prospective to inspire gross

domestic product (GDP), production, foreign exchange, cultural

and social development, investment, and so forth. through its

direct and indirect linkages (Liu & Var, 1986; Long, Perdue, &

Allen, 1990; Milne, 1990). Thus, this industry acts as a catalyst for

economic development and helps in regional development. The

tourism industry provides opportunities to earn foreign exchange

on very low capital investment (Lee & Chang, 2008). Tourism

offers many benefits to countries as it is an export activity, the

tourist comes to the domestic nation and demand continue to

grow very rapidly worldwide as consumer comes to the producers

(Balaguer & Cantavella-Jorda, 2002). As a result, income can flow

more quickly if the tourism strategy and marketing are sound

(World Tourism Organization (WTO), 2001).

Tourism is an integral part of the development strategy of today's

world. A significant part of its developmental potential arises from the

fact that it links various sectors and activities involving accommoda-

tion, transport, entertainment, construction, service, agricultural, and

so forth. In short, tourism expenditure can favor a country's economic

growth through its positive effect on the economy as a whole by way

of spillovers and other externalities (Marin, 1992). Kulendran and Wil-

son (2000), in their studies of Australia and China, respectively, they

observed a strong reciprocal relationship between international trade

and international travel.

Tourism and GDP have a causal relationship. Tourism opens the

new way of trade with the world, which ultimately affects the GDP.

Agriculture, production, telecommunication, electricity, water supply,

and security are some of the activities that increase production as well

as consumption of tourism. This can be very helpful if generating and

providing employment to a large portion of population. Tourism has

many sectors and thus contributes significantly in socioeconomic

development. Employment helps in the eradication of poverty or we

Received: 2 September 2019 Revised: 22 October 2019 Accepted: 20 May 2020

DOI: 10.1002/pa.2202

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https://doi.org/10.1002/pa.2202