Tourism-Led Growth Hypothesis in Mediterranean Countries: Evidence from a Panel Cointegration and Error Correction Model

Abstract

Today, there is a consensus on the contribution of the tourism sector to the economy in Mediterranean countries, which have a significant share in the world tourism. The objective of this paper is to investigate and estimate the effect of the tourism sector on economic growth in Mediterranean countries. This paper employs panel FMOLS and panel DOLS models using data consisting of nine Mediterranean countries over the period 1995-2014. Empirical findings indicate that tourism receipts and tourism arrivals affect economic growth positively in the long-run and that these results are valid as individually, which shows tourism-led growth hypothesis is valid in Mediterranean countries.