The impacts of governance and institutions on inbound tourism demand: evidence from a dynamic panel data study

ABSTRACT

This study explores the impact of governance and institutions on inbound tourism demand in Malaysia using a dynamic panel data approach for 45 tourism source countries over the period 2005–2015. The results show that institutions play a very important role in explaining the behaviour of inbound tourism demand. To obtain a better picture, we investigate the response of international tourists to disaggregated institutional quality. We find that international tourists are more concerned about political stability, governmental effectiveness, regulations, laws, and corruption than voice and accountability. Therefore, policymakers should focus on ways to improve institutional quality to significantly increase international tourist arrivals.

KEYWORDS:

• Dynamic panel GMM
• governance
• institutions
• Malaysia
• tourism demand

Acknowledgement

I would like to thank the two anonymous reviewers for their constructive comments and suggestions that significantly improved the present research paper.

Disclosure statement

No potential conflict of interest was reported by the author.

ORCID

Chor Foon Tang http://orcid.org/0000-0003-2242-9222

Notes

1. Knack and Keefer (1995) documented that institutional quality can be segregated into various dimensions such as corruption, rule of law, bureaucratic quality, government repudiation of contracts, and the risk of expropriation. These dimensions of quality of institutions are provided by the International Country Risk Guide (ICRG) and it has also been acknowledged in many studies (e.g. Asif & Majid, 2017; Chong & Calderon, 2000; Law & Azman-Saini, 2012)

2. The choice of alternative destinations in Asia and the Pacific region is based on the suggestion of Tang and Tan (2016) and the geographical factors.

Additional information

Funding

This research project was funded by the Population Studies Unit, University of Malaya.